This article first appeared in The Edge Financial Daily on July 10, 2019
Auto sector
Maintain neutral: On July 8, The Malaysian Reserve highlighted that Proton Holdings Bhd is planning to launch a new compact sport utility vehicle (SUV), X50, in the second half of 2020 (2H20). This will be the second SUV model by Proton after X70, which sold over 15,000 units in 1H19.
The article also reported that X50 will be based on Geely’s Binyue, which is using Geely’s B-segment modular architecture platform that shares the flexibility and scaleability of the larger compact modular architecture platform, which was co-developed with Volvo.
We are encouraged to learn that Proton has managed to reignite consumer interest with the success of the X70. Proton appears on track for recovery with multiple new model launches in the pipeline. Proton plans to launch one new model per year from 2019 to 2023.
Meanwhile, Proton has started local assembly trials for X70 at the Tanjung Malim plant in June following the completion of its first phase of expansion. The completely knocked down version of the X70 is expected to be launched by end of 2019.
X50 will likely compete in the B-segment compact SUV market, which is dominated by Honda HR-V, Mazda CX-3 and Renault Captur.
Although there was no official pricing from Proton, several automotive news portals project the estimated selling price for X50 to hover in the RM70,000 to RM90,000 range, which is very competitive compared with its peers.
In another development, Sime Darby Motors (SDM) is looking to expand its vehicle assembly portfolio to include new plug-in hybrid electric vehicle (PHEV) and hybrids at Inokom plant in Kulim. SDM is in discussions with two marques over potential new assembly programme and it expects to conclude a deal by end of 2019.
SDM aims to produce more PHEVs and expects to start exporting these PHEVs by 2021. PHEVs and hybrids produced by SDM formed 14% and 5% of Inokom total production volume in 2018.
Inokom is involved in the assembly of passenger vehicles, SUVs and light commercial vehicles for brands like BMW, Mini, Hyundai and Mazda. SDM indicated that Inokom still has 36.4ha remaining land allocated for potential expansion. SDM has allocated 20.2ha out of the 36.4ha for expansion within next three years.
Overall, Inokom looks poised to benefit from the upcoming expansion by Bermaz and additional marques by SDM.
Key upside risks to our “neutral” call are the strengthening of the ringgit versus the US dollar and Japanese yen, reduction in interest rate and favourable new policies. The ringgit depreciation versus the US dollar and Japanese yen, interest rate hike and lack of new model launches are key downside risks. — CGSCIMB Research, July 8