Is this the last few months of low car prices in Malaysia?
The SST discount is still running in Malaysia until the end of this year 2021. When January 2022 arrives be ready for rising new car prices and its not just because of the returning SST and detailed tax calculations as we mentioned in January this year. Let us explain.
News has just been shared that the cost of steel, a heavily used component in almost all new vehicles is rising and so far its rising costs have not been felt by the current stock of cars being sold in Malaysia.
The next batch of new cars coming from around the world will be hit with rising steel prices and lets not forget the rising shipping costs also.
In March 2020, prior to the COVID-19 pandemic, steel prices traded between USD500 and USD800. The price of steel as of July 2021 is up over 200 percent, trading at USD1,800, and many involved in the market do not see the price reducing until at least 2022.
Toyota Motor will raise the price of steel materials that it sells to its suppliers in the second half of fiscal year 2021 by about 20,000 yen (USD182) per ton, its largest price hike in over a decade, this was reported recently by Nikkei online.
The move is Toyota’s first price increase in two years and highlights the impact of rising commodity prices as global industrial activity recovers from the COVID-19 pandemic.
Toyota will notify the suppliers soon. Price negotiations between Toyota and steel producer Nippon Steel appear to have been settled with a significant increase. The two companies negotiate semiannually based on the prices of iron ore and coking coal, the main raw materials for making steel. Toyota purchases a large amount of steel at a price decided by negotiation and then wholesales it to component manufacturers.
The increase in the price of supplied materials will exceed the 18,000 yen per ton (RM686.00) in the second half of fiscal 2010 and will be the largest since that same fiscal year, when negotiations between the two companies changed from once to twice a year. The rate of increase varies depending on the type of steel material, but the typical one is estimated to be over 20 percent.
Passenger cars in general each contain roughly 0.7 tons of ordinary steel. If the price per ton rises by 20,000 yen (RM762.00), the cost of steel materials will increase by about 15,000 yen per car (RM572.00).
Prices of raw materials, an important metric in the negotiations between Nippon Steel and Toyota, are skyrocketing. The average price of iron ore procured by domestic steel companies from April to September 2021 was over USD160 per ton, up 50 percent from the period running from October 2020 to March 2021. The average price of coking coal from January to June 2021 is nearly 10 percent higher than that from July to December 2020.
The rise in steel prices is also due to a sharp overall rise in global steel prices. Due to the recovery from the pandemic, production activities and construction work are growing around the world, and demand for steel products is strong.
The price of hot-rolled coils used in a wide range of applications in East Asian markets will remain at just under USD1,000 per ton, twice the level of the same period last year. It has exceeded USD2,000 for the first time in the U.S.
There is also another reason for the rise in new car prices. There seems to be a change in what consumers want to buy now. The shift from less expensive sedans to pricier supercars/sport-cars, luxury sedan, SUVs and MPV’s was accelerating even before the pandemic.
Car manufacturers are responding by cutting production of their less popular models to preserve the computer chips they have available for SUVs, MPV’s supercar and trucks, although even those models are seeing some reduced production.
