KUALA LUMPUR: Supply chain disruption in Malaysia's automotive sector will likely continue to affect sales of new vehicles this year, despite a pent up demand for personal mobility, according to industry executives.

They believe the total industry volume (TIV) will hover between 460,000 units and 500,000 units this year as manufacturers struggle to meet rising demand.

This was due to the semiconductor shortage and the manufacturers and assemblers' inability to procure certain parts and components, they added.

Bermaz Auto Bhd (BAuto) executive chairman Datuk Seri Ben Yeoh said public transport and car-sharing were not a favourite at the moment on continuous fear of being infected by Covid-19.

"There is a pent up demand for vehicles as a result of the Covid-19 pandemic, especially on the need for personal mobility. This trend is showing up especially in demand for used cars," he told the New Straits Times (NST) recently.

Yeoh said the Sales and Services Tax (SST) incentives would continue encouraging consumers to change new cars as residual prices were relatively good due to demand for used cars against the short supply.

"New cars sale should be good, but supply situation may be interrupted by parts supply and semiconductor chips. This is a result of the shutdown in operations for a couple of months by manufacturers to contain the infection," he said.

Yeoh said the supply situation would result in a lower TIV than initially projected.

"Hopefully, if the government extend SST incentives, the outstanding bookings will increase, and we believe parts supply will normalise in 2022," he added.

Malaysia Automotive, Robotics and IoT Institute (MARii) chief executive officer Datuk Madani Sahari said the recent reopening of the economy had allowed manufacturers to resume operations at full capacity.

"The lifting of interstate travel is expected to invigorate the economy, and in turn will contribute to an increase in demand in vehicles as tourism, entertainment and more travel-based activities are allowed to re-open," he told the NST.

MARii expects Malaysians to take advantage of the remaining SST exemptions on new vehicles until the year end.

"We believe it is still possible for the industry to catch up with a target of at least 500,000 units by the end of 2021," Madani said.

He said the main challenge for the final quarter of 2021 remained chip shortages that could dent the production of new vehicles globally.

"This may affect the momentum of vehicles production towards the year-end. However, Malaysia is part of the semiconductor supply chain, and the gradual lifting of restrictions domestically has eased the shortage of chips globally," he said.

Madani said using data-driven decision-making in production planning, constant customer communication and value chains could be the best course of action to mitigate supply chain risks.

"The International Trade and Industry Ministry and its agencies are looking towards new strategies to further mitigate problems due to this shortage, including government to government engagement, government to business engagement as well as facilitating the use of big data management technologies in production planning," he added.

Malaysian Automotive Association president Datuk Aishah Ahmad said new vehicles registrations from September were expected to rise due to the re-opening of the Road Transport Department premises and continued SST exemption.

"We maintain our TIV forecast of 500,000 for 2021. Although we are still behind our target, we believe consumers' confidence doesn't return in total. People are still hesitant about the recovery as many have lost their jobs and some have experienced salaries cut during the pandemic," she told the NST.

Nonetheless, she said new cars' movement (production and delivery) would be easier as most assembly plants in the Klang Valley had resumed at full capacity.

She said not all car manufacturers were affected by the chip shortage, but rather certain brands and models.

"We work closely with original equipment manufacturers and suppliers to fulfil the production of new vehicles, and the situation is gradually improving," she added.

Malaysia's new vehicle sales dropped 23.3 per cent to 44,275 units in September from 57,758 units a year ago.

Year-to-date, registration for new vehicles eased 7.3 per cent to 318,874 units from 344,019 units in the nine months of 2020.

Kenanga Research analyst Wan Mustaqim Wan Ab Aziz has maintained a "Neutral" call on the automotive sector with a TIV target of 460,000 units for 2021.

"We believe the recovery begins in the fourth quarter of 2021 on the back of economic reopening and the usual year-end promotional campaign," he said.

Kenanga Research expects a more robust recovery next year with TIV forecast of 600,000 units, driven by more relaxation of standard operating procedures in the post lockdown (endemic phase).

"This could revitalise local travel, which should push demand for passenger vehicles especially the affordable national marques as well as recovery in semiconductor chip supply,' Wan Mustaqim said.