E-Invoicing Expected to Impact Car Sales Significantly, Says TA Securities

TA Securities has highlighted that the implementation of e-invoicing in Malaysia is poised to significantly impact car sales, although its effect on automotive companies with in-house financing arms will be limited. The analysis follows the introduction of the e-invoicing system, which is gradually being rolled out across various business sectors in Malaysia.

Key Insights:

1. Impact on Car Sales:

   • TA Securities anticipates that the mandatory adoption of e-invoicing will pose challenges for car buyers, particularly in securing full loan amounts that were previously offered by certain sales agents. The new system is expected to reduce practices of invoice inflation, making the car purchasing process more transparent but potentially more challenging for buyers relying on higher loan amounts.

2. Automotive Industry Transparency:

   • The introduction of e-invoicing, which digitalizes transaction documentation, is aimed at creating a more standardized and transparent process. For the automotive sector, this could curtail the practice of inflated invoices, affecting how car sales transactions are conducted and financed.

3. Implementation Phases:

   • The first phase of e-invoicing began on August 1, involving companies with annual revenues exceeding RM100 million. Subsequent phases will extend the requirement to companies with smaller revenues, culminating in mandatory adoption for all taxpayers by July 2025, excluding those with annual turnovers under RM150,000.

4. Current Automotive Market:

   • Despite the upcoming challenges from e-invoicing, the Malaysian automotive industry has shown stable growth. The Malaysian Automotive Association reported a 23.6% month-on-month increase in total industry volume (TIV) in July 2024, driven by a longer working month, new model launches, and recovery from temporary plant shutdowns.
   • Year-to-date, TIV has increased by 7.2% compared to the previous year, with significant growth in the passenger car segment.

5. National vs. Non-National Brands:

   • National car brands like Perodua and Proton saw strong sales growth in July, with Perodua reporting a 35.2% month-on-month increase and Proton a 39.1% increase. In contrast, the non-national car segment recorded modest growth, with Honda leading the passenger market share among non-national brands.

6. Market Outlook and Recommendations:

   • Despite the positive performance in recent months, TA Securities maintains a neutral outlook for the sector. The firm anticipates future car sales will be affected by the adoption of e-invoicing and declining consumer sentiment amid the implementation of targeted fuel subsidies.
   • TA Securities has retained its 2024 TIV forecast of 700,000 units, representing a 12.5% year-on-year decrease. The firm has issued a 'sell' recommendation on MBM Resources Bhd with a target price of RM4.70, a 'buy' on Bermaz Auto Bhd with a TP of RM2.74, and a 'hold' on Sime Darby Bhd with a TP of RM2.85.

In summary, while the implementation of e-invoicing is expected to bring greater transparency to the automotive industry, it may also present challenges that could impact car sales, particularly in securing financing. The broader market outlook remains cautious, with potential headwinds from both e-invoicing and broader economic factors.