Carmakers driven into a corner
AUTOMOTIVE sales may decline this year due to higher rejection rate of car loans as a result of new lending guidelines from Bank Negara Malaysia.
Car sales in January dropped by 25 per cent to 40,948 units from the 54,781 units recorded in the same period last year. The decline is above most analysts' expectations.
"It is too early to say whether the lower car sales is a one-off slump or the start of a prolonged decline. But we are not discounting the possibility of a lower total industry volume this year," said an analyst from a foreign brokerage.
The guidelines, aimed at improving consumer protection and making them more prudent as borrowers, required banks to look at their customers' net income instead of gross income when considering loan applications.
The guidelines were implemented early this year.
The country's two largest carmakers, Perusahaan Otomobil Kedua Sdn Bhd and Proton Holdings Bhd, are expected to be the biggest casualties of the new guidelines.
"It generally hurts the lower income segment the most," the analyst said.
According to sources, loan approval rate has declined substantially at Perodua.
Its popular Myvi, which registered an approval rate of 75 per cent in December 2011, posted an approval rate of 68 per cent last month.
Worst hit was its Viva models, with its approval rate declining to about 55 per cent in January, down from 70 per cent in December 2011.
"January was still survivable for me as my branch performed rather well. But we are feeling the impact this month.
I have submitted 20 applications for approval and after one week, only three were approved," said a Perodua branch manager who declined to be named.
According to the branch manager, the guidelines were also slowing down the car purchasing process.
"Last time, if a customer with good record comes to purchase a vehicle, we could submit the application in the morning and get the loan approved on the same day.
"But now, we need up to two days and this is slowing us down," said the branch manager.
Proton Edar Dealers Association Malaysia, in a statement yesterday, said the guidelines had "severely damaged" members' sales, with only 30 per cent of applicants securing car loans in the first two months of the year.
"If this measure is not reviewed, the automotive industry, which supports the country's economic growth, will collapse," said its president Armin Baniaz Pahamin.
Meanwhile, analysts are mixed on the possibility of Bank Negara tweaking part of the guidelines to help the industry.
"There is always the possibility.
The main reason for the guidelines is to reduce or put household debts in control.
"Since the main culprits for household debts are credit cards and personal loans, we don't see why a minor relaxation can't be applied on hire purchase loans," said an analyst from a local research house.
However, another analyst believes it is unlikely the central bank would make a "U-turn".
"It is not Bank Negara's style to do that.
Nevertheless, I believe this is not the end for the automotive industry.
I believe the industry, which includes the carmakers, banks and car buyers, will eventually adjust to the new rule.
"We expect a soft first half for the auto sales, before improving in the second half," said the analyst from a foreign brokerage.
Source : New Straits Times
Date : 22 February 2012
afternoon highlight (22/02/12/033/507)
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