Margins will continue to narrow as ringgit is expected to remain weak in 2017 and companies are forced to offer discounts to clear old inventories.
KUCHING: Analysts are projecting that headwinds for auto companies in Malaysia will continue next year, while others predict that the automotive sector will have mild recovery in 2017.
In a press release, the Malaysian Automotive Association (MAA) said sales volume in November was 2.5 per cent or 1,206 units higher than October. This was on the back of new model launches and very attractive offers and discounts by car companies.
Total industry volume (TIV) for year to date (YTD) November 2016 was 13.7 per cent lower than similar corresponding period in 2015.
The research arm of TA Securities Holdings Bhd (TA Research) believed headwinds for auto companies in Malaysia will continue in 2017.
“Firstly, sales volume will remain weak as stringent hire purchase loan requirements persists, new alternative transportation is introduced, car ownership costs increases and consumer sentiment recovers slower than expectations.
“Additionally, margins will continue to narrow as ringgit is expected to remain weak in 2017 and companies are forced to offer discounts to clear old inventories.
“Lastly, there was some excitement in 2016 as Perodua launched its first sedan whilst Proton refreshed its model line-up,” TA Research said.
The research arm noted that launches in 2017 will likely pale in comparison.
Meanwhile, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) had in its 2017 sector outlook trimmed its 2016 TIV forecast to 576,636 in anticipation of this weak build up to the year end campaigns.
MIDF Research also introduced its 2017 forecast of 589,033 units representing a mild two per cent growth against an exceptionally weak base in 2016.
The research arm added that 2017 will be driven largely by full year impact of the introduction of new national car models from end third quarter of 2016 (3Q16) as well as Toyota’s new Vios in October.