Should the SST discount holiday be extended in 2022 or not?

Is this the best way to keep new car sales brisk, or…….

 Last year when the Malaysian government announced a removal of the 10 percent sales tax on new cars and also reconditioned imported cars, there was a surge in new cars sales as well as reconditioned car sales. The economy started buzzing as movement restrictions were eased and Malaysians with enough money in the kitty and also in their employee provident fund (EPF/KWSP retirement savings) were ready to take ownership of a shiny new car.

This move was welcomed by the Malaysian Automotive Association (MAA) and the Malaysian Association of Malay Vehicle Importers and Traders (PEKEMA who are reconditioned AP car importers) as it meant a revival of our depressed car industry. Car factories reopened and car showrooms started seeing more and more walk-ins.

As the months progressed we were also getting calls, emails and messages from our readers, friends and relatives seeking advice on which new car to purchase as the market was starting to fill up with new vehicle launches that were held back for almost a year due to the pandemic.

We shared our advice and some did take it and many others were sucked in by sales people ‘talk’. We started seeing many new car buyers bringing home vehicles that did not suit their lifestyle or need because with a SST discount, they were persuaded by car showroom salespeople to buy a slightly more expensive and also ‘complicated’ plug-in hybrid vehicle (PHEV) without knowing the issues related to PHEV’s. 

Then there were some others who really did not need a NEW car as their current car was serving them very well and still under a strong factory warranty. However, seeing the SST discount and the flurry of excitement, they were drawn into the new car ownership experience as they needed an ‘escape hatch’ from the Covid-19 pandemic. With no overseas travel and the holiday money in their pocket, they wanted the new car ‘smell’.

 With the SST discount in place, new cars were cheaper, but this also meant that their trade-in car would also be offered at a much lower price, despite its good condition. So, in total, they were not gaining anything except the new car smell.

Example, we had a friend who was driving a 4-year old Nissan X-Trail. With no issue and still under warranty, the X-Trail was a good family car. Then the ‘itch’ came and he wanted a new SST free car. We suggested to wait, but he didn't listen and went into a BMW showroom to look at the entry model X3 sDrive20i which was priced at RM 286,674.00. Now, this is a big jump from his RM 153,888 X-Trail 2.5L 4WD. 

The itch was strong and peer pressure from family to show a better life pushed him towards buying a BMW. However, after some sales talk from the BMW sales advisor, he took a BMW 330e PHEV for a test drive. Now, this sports sedan is very quick and entertaining with its plug-in hybrid system working to entertain the driver. At RM 264,613.13 (with SST discount) it is priced lower than the petrol-powered safer bet X3 sDrive20i. 

 Without seeking further advice, he made the booking for the 330e and a week later brought it home with the added RM 4,000 coating and RM 3,800 tinting recommended by the BMW salesperson (a big 100 percent margin enjoyed by the salesperson). 

His no issue, reliable X-Trail was traded-in at a low price, but he had that new car smell to be contented with. Three months into ownership here lies the problem with his 330e PHEV. He lives in a condominium with NO charging points.

He has started getting occasional warning lights on his dashboard cockpit. He has just realized the high depreciation of BMW PHEV’s after 5 years. He has just realized the high cost of BMW run-flat tyres which last half the mileage of regular tyres.

Regret has set in. This is one of the few reasons why the SST should not be continued after June 2022 as it encourages people who cannot afford a new car to think they can because of the discount. The SST has already done what is necessary to boost Malaysian car sales and production in the last year. Now the economy will adjust back as businesses are back almost 80 percent.

New car sales will continue to rise despite no SST discount as people are back working and will continue to buy new cars. The government needs to fill up their piggy bank with SST payments as it is almost empty with the Covid-19 pandemic.

Also read: Which used car today makes economical sense to buy?