KUCHING: Malaysia’s automotive sector’s growth momentum is expected to shift to a lower gear for the rest of the year as high base from the previous year and slower consumer spending takes its toll on the sector.
Kenanga Investment Bank Bhd’s research arm (Kenanga Research) yesterday maintained its conservative total industry volume (TIV) forecast of 668,900 units which is an increase of two per cent year-on-year.
Sales momentum from the second half of 2014 (2H14) onwards is expected to slow down, it opined, due to the high base in 2H13 (pick-up sales post-election) as well as the slower consumer spending amid rising cost of living.
“On the earnings side, with the ongoing stiff competition, we reckon that the earnings growth for its tracked automotive companies this year could be kept in check,” it said.
The research team explained that the market condition in Malaysia could trigger more aggressive discounts and higher marketing costs.
Unfavourable exchange rates such as strengthening of US dollar versus Malaysian ringgit could also corrode the profitability of players with huge exposure of imported completely knocked down (CKD) automotives in US dollar.
Meanwhile, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said despite the sound domestic economy, aggressive competition in Malaysia might lead to margin pressures for some companies.
In terms of sales breakdown, Kenanga Research opined the non-national segment would continue to gain traction on the assumption of more CKD energy efficient vehicles (EEV) being introduced in conjunction with the government’s initiatives in promoting Malaysia as the EEV regional hub.
“Our sales mix assumption of national and non-national segments for 2014 is 52:48,” it commented.
On the other hand, MIDF Research said in the month of July, the market share between the national and nonnational brands was evenly split.
“We believe this could be viewed positively as the auto industry does not seem to draw any impact from the central bank’s overnight policy rate (OPR) hike during the month.
“Nevertheless, we think it is still too early to draw any conclusions on this. For the cumulative period, the market continues to be dominated by the non-national makes which garner 52.3 per cent of the market due to the surge in Honda’s sales and the recovery in Toyota’s,” it opined.
On the automotive sector’s performance for the month of July, Kenanga Research explained, while the TIV in July inched up three per cent m-o-m on the back of continued aggressive sales campaign by industry players amidst the Hari Raya celebration, y-o-y, sales plunged by 12 per cent to 60,267 units.
“We believe this was due to the high base in July 2013 (pick-up sales post-election).
“As a result, the cumulative TIV growth of six per cent previously (year to date June 14) has been narrowed to three per cent year to date (YTD) which is closer to both our and Malaysian Automotive Association (MAA) 2014 TIV growth forecasts of 668,900 units (an increase of two per cent) and 680,000 (an increase of 3.7 per cent), respectively.”
Looking at passenger marques; both national players Perodua and Proton’s sales remained lacklustre at 113,618 units (minus two per cent) and 74,085 units (minus nine per cent), respectively.
Kenanga Research believed this mediocre performance was mainly due to rising cost of living faced by its targeted customer base (middle-income car buyers) as well as the lack of new model launching.
As for the non-national marques, both Toyota and Honda remained YTD sales remained positive at 43,589 units (an increase of 20 per cent) and 43,888 units (an increase of 57 per cent), respectively.
This was thanks to overwhelming demand received by their new launches (such as Toyota Vios, Toyota Altis, Honda City and others) against lower base last year, the research team noted.
On the other hand, it said, Nissan’s YTD sales are still capped in negative.
All in, Kenanga Research and MIDF Research maintained their ‘neutral’ call on Malaysia’s automotive sector.