PETALING JAYA (Feb 21): Sime Darby Bhd is expected to increase car prices in Malaysia following a 2% rise in the service tax, according to its group chief executive officer Datuk Jeffri Salim Davidson.
Jeffri said Sime Darby will treat the tax rate increase, which will be applicable to all other automotive players as well, as part of its cost of doing business.
"In theory, yes [car prices will increase]. But the car price is set depending on competition, so it won't exactly be 2%. And then we have other factors that come into play. So, it's difficult to say exactly that car prices will go up by 2%," he told reporters on Wednesday at a media briefing on its second quarter financial results.
In Budget 2024, the government proposed that the service tax be bumped up by 2%, from 6% to 8%, effective March 1, 2024.
'No possibility of us leaving the China market'
Meanwhile, Jeffri said Sime Darby has no plans to exit its motor business in China even though the country's economy is expected to slow down over the next couple of years. He said the Chinese economy is just going through a "trough" and that Sime Darby is confident that its recovery is imminent.
"No, there's no possibility of us leaving the China market. It has been a very profitable market for us.
"Now we are going through the trough in China. We'll just have to live through it [and] we are doing what we can to minimize our costs. But we will hang in there because we believe that the Chinese economy will pick up and they will come back. So I think we're just waiting it out for a bit and whilst waiting, we are just going to make sure that we manage our costs," he said.
Sime Darby's wholly-owned subsidiary Sime Darby Motors entered the Chinese market over 50 years ago by becoming the sole importer and distributor of BMW cars and BMW motorcycles in Hong Kong and Macau in 1972.
Through the years, it has expanded its brand network to include other luxury marques such as Rolls Royce, Lamborghini and McLaren, to name a few. It has also expanded its dealer network in China and has more than 40 stores across the country covering major cities such as Shenzhen, Beijing and Shanghai.
Major international investment banks expect China’s economy to grow at a slower pace in 2024, with an average forecast of 4.6%, cooling further to 4.5% in 2025, compared with the 5.2% growth it achieved in 2023.
Despite beating the official growth forecast in 2023, the world's second-largest economy has struggled to mount a strong and sustainable post-Covid pandemic recovery, burdened by the protracted property crisis, weak consumer and business confidence, mounting local government debt, and weak global growth.
"For China, we just have to manage through the troughs for the next, I don't know, hopefully for another one or two years," Jeffri observed.
Sime Darby posts massive 2Q net profit on disposal gain
Earlier on Wednesday, Sime Darby reported a massive surge in net profit to RM2.29 billion for the second financial quarter ended Dec 31, 2023 (2QFY2024), from RM389 million a year ago, mainly because of a RM2 billion gain on the disposal of Ramsay Sime Darby Health Care in December 2023.
The conglomerate’s quarterly revenue rose to RM15.55 billion from RM11.29 billion. It declared a dividend of three sen per share, to be paid on March 27.
For the cumulative six months ended Dec 31, 2023 (6MFY2024), Sime Darby’s net profit jumped to RM2.88 billion from RM596 million, on the back of revenue of RM29.53 billion versus RM23.47 billion previously.