Friday 29 Mar 2024
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KUALA LUMPUR (Dec 21): CIMB Research has maintained its "underweight" rating on the Malaysian automotive sector as consumer sentiment remains depressed, with buyers refraining from spending on big ticket items, as reflected in the lower total industry volume (TIV) for the first 11 months of 2016 (11M16).

In a note yesterday, the research firm noted that new vehicle sales or TIV for 11M16 is at its weakest since 2009, and expects margins for automakers to stay compressed as they attempt to push flagging sales via aggressive promotional campaigns.

To recap, TIV in November 2016 increased 2.5% month-on-month (m-o-m) to 49,085 units. However, on a year-on-year (y-o-y) basis, TIV declined 12.5% from November 2015. For 11M16, TIV stood at 515,293 units.

"[This] still lags 11M15's by 13.7%. [Year-to-date TIV] makes up 88% of our FY16 forecast of 586,000 units, down 12% y-o-y and 89% of the Malaysian Automotive Association's (MAA) forecast of 580,000 units," CIMB Research said.

Despite expectations of TIV improvements in December 2016 on the back of better promotional offerings and an anticipated price hike in 2017, there is downside risk to CIMB Research's and MAA's TIV forecasts.

"Upside risk to the sector, [on the other hand], is a pick-up in consumer sentiment resulting in higher sales volumes," it said.

Meanwhile, TIV of non-national marques increased 9.2% m-o-m in November to 26,301 units after consecutive monthly declines since September 2016. The research house noted that most mass-market marques saw m-o-m improvements, except Mitsubishi (down 10% m-o-m), Mazda (down 20.1% m-o-m) and Volkswagen (down 36% m-o-m).

This, said CIMB Research, was on the back of deliveries of new model launches and rebates given by the non-national carmakers.

"National marques declined by 4.2% m-o-m as consumers wait for year-end promotions, which was just recently launched in early-December," it said.

The top five market share positions were maintained in November 2016, with Perodua in pole position (31.5%), followed by Honda (18.1%), Proton (14.9%), Toyota (13%) and Nissan (6.2%).

"Proton has maintained its No. 3 position, after it overtook Toyota in October 2016, and we think the year will end with Proton carving a bigger slice of the market than Toyota as consumers in the low-income space are likely to opt for Proton's cheaper models such as the Saga and Persona," CIMB Research said.

On the other hand, the firm expects another round of average selling prices (ASP) hikes in 2017 due to higher operating expenditure caused by the currency volatility.

This year, Honda, Toyota and Nissan had raised their ASP by about 2% to 9%, whereas Proton increased its ASP by 5%.

Perodua had indicated that it may raise ASP, whereas Mazda had announced plans to raise its ASP by 3% to 5% in 2017. While ASP hikes may not affect Mazda, which caters to the more affluent consumers, it may take a toll on Perodua, which serves the lower-income consumers.

"We do not expect this to have a major impact on marques like Mazda with its a mid-to-high income consumer base. But it could be negative for Perodua as its low-income consumer base is more sensitive to price hikes," CIMB Research said.

DRB-Hicom Bhd remains the firm's top pick, premised on Proton's potential turnaround pending the entry of a foreign strategic partner, which is expected to be concluded by the first half of 2017.

 

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