SALES of diesel-powered vehicles have dropped severely following implementation of the diesel subsidy rationalisation in June, said Federation of Motor and Credit Companies Association Malaysia vice-chairman Donald Chan. 

He said sales of diesel-powered four-wheel drives and trucks plummeted by at least 50% after Putrajaya’s decision to remove blanket diesel subsidies in Peninsular Malaysia.  

“After the removal of the blanket subsidy of diesel, obviously the increase in the price of diesel was very drastic. And this resulted in the sales of diesel-powered vehicles dropping by almost 50%.  

“The removal of subsidy and having to bear the increase in other costs have severely affected the sales by half,” Chan, an authorised dealer for Isuzu diesel pick-up trucks, told The Malaysian Insight.  

Putrajaya decided to cut diesel subsidies and float retail prices to align with market rates from June 10. This would only impact Peninsular Malaysia, leaving Sabah and Sarawak unaffected.

Based on the latest weekly petrol price update, diesel was priced at RM3.18 per litre.  

The fuel subsidy rationalisation plan was aimed at saving RM4 billion per year for the government.  Malaysians who were affected by the subsidy removal would receive government assistance. 

Under the Budi Madani scheme, private diesel vehicle owners, small-scale farmers, and commodity growers would receive RM200 in monthly cash assistance. 

Besides this, the government introduced subsidies for traders using diesel-powered commercial vehicles that covered 10 types of public transport and 23 categories of delivery vehicles.  

The programme offered subsidised diesel fuel through fleet cards, helping businesses control fuel costs, streamline fuel purchasing processes, and reduce administrative burdens associated with fuel expense management. 

Nevertheless, Chan, who is also the Pahang Motor and Credit Companies Association chairman, said the RM200 aid for individuals was insufficient to drive up diesel vehicle sales.  

Claiming that most 4x4 pickups were owned by companies in sectors like construction, industrial, and plantation, Chan urged the government to extend the aid to all sectors, if possible.  

“It (Budi Madani aid) does not help as diesel vehicles are largely sold to companies who buy them for their employees for their daily work.  

“If (the aid) is extended to only individuals, I don’t think it is fair. I think it should be extended to all, including companies that buy for commercial use.  

“The government should extend the aid to commercial as well,” he said.  

Sales hitch 

Chan said several diesel-powered automobile owners were now struggling to offload their vehicles after removal of subsidies saw increases in diesel prices.  

“The demand for such vehicles has dropped and this affects the second-hand value. 

“Owners are contemplating disposing of the vehicles, maybe to replace them with petrol or other types of vehicles.  

“It’s a catch-22 situation. The owners can’t afford a loss, and they cannot find a buyer. Hence, they have to hang on for a little while,” he said.  

When asked if automobile manufacturers or dealers were working on ways to drive up sales, Chan said profit margins were tight and that the stretching of prices wouldn’t help.  

“If they were to stretch prices, it would eat into the profit. But if they do not want to stretch prices and hang on to stock, then they also can’t dispose of the stock.  

“Again, it is a catch-22 situation. So, we urge the government to readjust the subsidy or do whatever is necessary,” he said. 

He added that most 4x4 pick-up trucks were diesel-powered because of their fuel efficiency. 

“For example, if a diesel-powered vehicle and petrol-powered vehicle are of the same engine capacity, diesel is still 20% more fuel-efficient than petrol.  

“Hence, that is why people always rely on diesel for pickup trucks in Malaysia,” Chan said.  

Unfair to exclude Sabah, Sarawak 

Chan also questioned the government’s decision to not remove the diesel subsidy for Sabah and Sarawak. 

“Based on our study, we understand that Sabah and Sarawak are huge. Most travels are long distance, roads are very bad and almost every private and commercial vehicle is diesel-powered.  

“But the government should streamline the diesel prices across the nation. Make it the same for Sabah and Sarawak too.  

“It feels more like a political move to exclude Sabah and Sarawak,” Chan said.  

He added that the government should have consulted relevant stakeholders before coming to its decision.  

“They (the government) always hide in the sky, thinking they’ve made a good decision.  

“They should go all the way to the ground level, ask the owners, ask retailers… basically ask the whole chain.  

“At the end of the day, we (dealers) are the ones who suffer. Each dealership has about 20 to 30 workers. Many dealers are involved in this business.  

“When the government makes such hasty decisions, so many people are affected. Some have even laid off their employees because there are no sales,” he said. 

Previously, analysts were reported as saying they were expecting a lower sales volume of vehicles in Malaysia in the second half of 2024 due to fuel subsidy rationalisation. 

They projected 2024’s sales to fall by 9% due to the resumption of sales tax, higher fuel costs in the second half of year, and rising competition from the electric vehicle market. – September 5, 2024.