Friday 29 Mar 2024
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Automotive sector
Maintain “neutral”:
 The Malaysian Automotive Association (MAA) reported strong December total industry volume (TIV) at 64,700 units (an increase of 6.9% year-on-year [y-o-y]; an increase of 16.9% month on month [m-o-m], boosted by Perodua Axia as well as heavy discounts among original equipment manufacturers [OEMs] — (especially foreign marques).

Despite the 2014 TIV’s fall behind market expectation, 666,500 units (an increase of 1.6% y-o-y) was still another new high. 

We expect 2015 TIV to stay relatively flat at 663,000 units (a decrease of 0.5% y-o-y), mainly due to consumer uncertainties on the implementation of the goods and services tax and slower economy growth.

Perodua (UMW Holdings Bhd and MBM Resources Bhd) remained at the top with a 29.3% market share and 195,600-unit sales (a decrease of 0.3% y-o-y) versus targeted 195,000-unit sales in 2014. 

Sales rebounded in the fourth quarter of 2014 (4Q14) after the successful launch of Axia in mid-September 2014. 

Perodua is targeting sales of 208,000 units  (an increase of 6.3% y-o-y) in 2015, betting on the highly demanded Axia and the newly launched MyVi facelift.

Conversely, Proton’s (DRB-Hicom Bhd) market share fell to 17.4% with 115,800 units (a decrease of 16.6% y-o-y), after a weak second half 2014 (2H14) performance, due to foreign OEMs’ aggressive promotions and Perodua’s Axia launch. 

Proton has not seen meaningful sales rebound from its newly launched Iriz (end-September 2014).

Toyota (UMW) remained top among foreign marques with 102,000-unit sales (an increase of 11.9% y-o-y), attributed to new Vios, Altis and multi-purpose vehicle (MPV) variants. 

It recently introduced the upgraded Vios and Hilux in an attempt to defend market share from close competitors Honda City, Nissan Almera and Mazda 2.

Honda (DRB-Hicom) achieved strong growth of 50.3% y-o-y to 77,500-unit sales, beating its targeted 76,000 units in 2014, due to successful launches of its City and Jazz. 

Both models have recently been categorised as energy-efficient vehicles (similar to Perodua Axia). 

The newly launched HRV (mini sport utility vehicle or SUV) is expected to sustain Honda sales in 2015.

Nissan (Tan Chong Holdings Bhd) sales declined 12.8% y-o-y to 46,400 units due to heavy competition from Toyota and Honda. 

It introduced its Almera facelift recently to boost sales in 2015.

Other OEMs reported combined stronger sales at 129,200 units (an increase of 3.3% y-o-y) in 2014, driven by Mitsubishi (DRB-Hicom & MBM), Ford (Sime Darby Bhd), Mercedes (Cycle and Carriage Bintang Bhd) and Mazda (Berjaya Auto Bhd).

Risks are prolonged tightening of banks’ hire purchase rules, slowdown in the Malaysian economy, global automotive supply chain disruption, and sudden jump in fuel prices and interest rate.

Positives are potential export to the regional market (i.e. Malaysia as a hub), and implementation of the energy-efficient policy.

Negatives are tightening of bank lending rules and rise in inflation, instability of global automotive supply chain, and depreciation of the ringgit.

We maintain a “neutral” outlook on the automotive sector, with a target price of RM4. MBM is our top pick. — Hong Leong Investment Bank Bhd, Jan 22

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This article first appeared in The Edge Financial Daily, on January 23, 2015.

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