Malaysian Used-Car Market to See a Downtrend until 2020 F&S

Used cars have attracted some customers inMalaysia as they are typically 30 percent cheaper than their brand-new counterparts. Proton and Perodua have been the most popular brands in the used-car market, followed by Toyota and Honda. Low price, low cost of spare parts, and high resale value have primarily influenced customers’ brand preferences. Over the last few years, however, customer interest in used cars has been declining owing to intense price competition from new cars. In fact, approximately 60 percent of car buyers every year have been selling their used cars to purchase new cars.

Consequently, used-car sales volumes are expected to fall from 394,000 units in 2014 to 300,700 units in 2020.

With the announcement of the National Automotive Policy 2014, which aims to reduce new car prices by 20 to 30 percent over the next five years, buyer appetite for used cars has dampened, hurting an already ailing industry. On average, new car prices could be slashed by 1 to 3 percent post implementation of the goods and services tax in 2015. In anticipation of these trends, Malaysians are holding off used-car purchases in favour of the new car market.

“In Malaysia, the used-car market functions in tandem with the new car market. If the prices of new cars fall, so will the prices of used cars,” said Frost & Sullivan Automotive & Transportation Principal Consultant, Mr.Animesh Kumar. “In these circumstances, customers are more likely to invest in new cars rather than used ones.”

Whatever the case may be, the automotive industry will lose access to the majority of buyers – especially from the public services sector – as Bank Negara Malaysia (BNM) has put a cap on the number of loans that an individual can take. To curb rising household debts, BNM has also raised the Overnight Policy Rate or OPR by 0.25 percentage points, dissuading customers from taking loans and adversely impacting the new and used-car market.

Many used-car dealers in Malaysia have been looking to cut down inventory to decrease exposure should new car prices drop unexpectedly. They have also been more selective in buying trade-ins, selecting only brands and models that can be sold off quickly.

“Used-car dealers should design platform strategies involving mobile apps and virtual technicians to better educate, communicate and build relationships with customers,” advised Mr. Kumar. “These measures will enable them to compete with new car manufacturers, who have been implementing aggressive promotional campaigns and offering discounts to customers.”

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