Auto sector TIV sees less ‘vroom’ for August

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KUCHING: The automotive sector’s total industry volume (TIV) for August 2014, which fell 15.2 per cent month on month (m-o-m), was expected by analysts as sales in July 2014 was boosted by various aggressive promotional campaigns for the Hari Raya festive season.

According to the research arm of TA Securities Holdings Bhd (TA Research), this was expected given the rush deliveries in July prior to the Aidil Fitri and Merdeka celebrations as well as shorter working days during the holiday festive period.

As such, the research arm of CIMB Investment Bank Bhd (CIMB Research) highlighted that August saw a m-o-m decline in sales volume for almost all the major local auto companies, except for Honda which saw a flat monthly sales volume growth, which it believes was due to the still strong City sales and the introduction of its new Jazz model.

On a comparative basis, CIMB Research noted that the national auto makers suffered bigger drops in their monthly sales volumes, plunging 23.1 per cent m-o-m to 23,196 units compared to their foreign counterparts’ 7.2 per cent m-o-m drop to 27,929 units, which is well expected as, in general, the buyers of the national cars are more sensitive to changes in car prices.

The research arm pointed out that for national auto makers, it expects the new model launches by Proton and Perodua to help boost their sales volumes and address their declining market shares.

It noted that Perodua has officially launched its Axia model, the A-segment car tagged with the energy efficient vehicle (EEV) status.

“With its highly attractive pricing starting at RM24,600 per unit, this model is reported to have received a highly positive response, with initial bookings of 13,500 units since the order-taking began on August 19.

“We believe Perodua will be more than able to meet its target of selling 30,000 units of this model by end-2014,” CIMB Research opined.

TA Research also expects Perodua’s sales to pick up in the coming months due to the strong response to its Perodua Axia.

“We believe its competitive and consumer friendly prices (starting price of RM24,600) will help Perodua to sustain its sales growth going forward,” the research arm observed.

In terms of Proton, CIMB Research noted that the auto maker is also expected to launch its new Iriz model on Thursday.

From the information that the research arm has gathered, the new model is a B-segment car that will be priced from RM42,000, with standard electronic stability control and a five-star ASEAN NCAP crash safety rating across the whole range.

“Proton really needs this model to be successful to address its declining sales volume and regain its market share, and judging by information on the technical specifications, we expect this model to be well-received by the market,” it opined.

Overall, CIMB Research maintained its TIV forecast of 670,000 units for this year and ‘neutral’ recommendation on the auto sector.

Although the August TIV figures were much lower than July’s, it expects the TIV growth to be sustained by the new Proton Iriz and Perodua Axia models, both of which are expected to become high volume models, as they are competing in the A and B segments respectively.

“We advise investors to remain on the sidelines for now, as we believe all the auto companies under our coverage currently are fully valued.

“We would await further developments to spur more attractive valuations,” the research arm advised.

Similarly, TA Research maintained its “neutral”stance on the automotive sector.

It highlighted that the next key event to watch out for is the coming Budget 2015, scheduled on October 10, 2014.

The research arm added that the fuel subsidy rationalisation program and whether goods and services tax (GST) will be imposed on petrol and diesel sales will be major measures to watch out.

“We believe that the fuel subsidy rationalisation will be neutral to the low-to-middle income groups but negative for the high income group,” it opined.

TA Research projected that sales of premium brands may be negatively impacted by knee-jerk reaction and that Sime Darby Bhd, MBM Resources Bhd and Cycle & Carriage Bintang Bhd could be potential losers.

“However, historical evidence (based on sales pattern post-petrol price hike) suggest the long term impact will be muted,” it said.

The research arm believes that potential winners are energy efficient cars.

It added that beneficiaries are UMW Holdings Bhd, DRB-Hicom Bhd and Berjaya Auto Bhd.