Perodua expected to lose market share in FY17

0

KUCHING: Perusahaan Otomobil Kedua Sdn Bhd (Perodua) is forecasted to experience a decline of 1.5 per cent in market share in fiscal year (FY17), which will reduce its market share to 34 per cent from an estimated 35.9 per cent in FY16.

During the Perodua 2016 Performance Review on Tuesday, president and chief executive officer (CEO) Datuk Aminar Rashid Salleh declared that Perodua was targeting to capture 34 per cent of market share or sell surpassing the 200,000 mark at 202,000 vehicles in 2017.

Currently, Perodua is the market leader with a market share of 35.9 per cent, followed by Honda at 15.3 per cent, Proton at 12.4 per cent, and Toyota at 11.2 per cent.

This lowered forecast of market share in 2017 comes as a surprise as total industry volume (TIV) is set to see a slight improvement to the market with a two per cent growth to 590,000 units this year, from 579,600 in 2016.

To explain this discrepancy, Aminar commented: “Under very tough market conditions and probably because other players also face challenges, the industry’s TIV for last year contracted 13 per cent while we dropped three per cent in sales performance.

“As such, we forecast the market to continue to be tough this year as suggested in the number of bookings and as competition continues to get tougher,” declared Aminar while mentioning that the forecast is not set in stone and may receive upward reviews depending on improvement in economic indicators.

On the other hand, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) believes that Perodua may in fact stand to benefit from some of the challenges the automotive industry is currently facing such as the weakening of the ringgit.

“The weak ringgit is still a significant risk factor for autos going forward as the strength in the US dollar (USD) will raise import costs for auto players.

“However, the Japanese yen’s weakness seen post-US elections is viewed as positive for select players such as Bermaz Auto Bhd (Bermaz) and to a certain extent, Perodua,” explained the research arm.

In a recent automotive sector update, the research arm reported that UMW Holdings Bhd (UMW) imports are completely denominated in the US dollar while Tan Chong Motor Holdings Bhd has around 85 per cent exposure to US dollar imports with the rest in yen.

While it is not known what percentage of Perodua parts are imported in US dollar and yen, the local auto manufacturer seems to be poised in middle ground of other industry players due to its higher localisation.

The auto player expected to most benefit from the weak yen is Bermaz whose imports are completely denominated in the yen, but only exposed to foreign exchange (forex) via its Mazda CBU imports which accounts for approximately 30 per cent of sales.

“Every 1 per cent change in yen will impact Bermaz’s FY18F earnings by 2 per cent and Tan Chong’s FY17F by 5 per cent. Meanwhile every 1 per cent change in US dollar will impact UMW’s FY17F earnings by 116 per cent and Tan Chong’s FY17F earnings by 21 per cent,” forecasted the research arm.

In response to the weakening ringgit, industry players like Toyota and Honda have raised their prices by 3 to 7 per cent and Proton by around 5 per cent, in early 2016.

With only mild recovery forecasted for the Ringgit this year, the research arm does discount any potential pricing hikes by players to offset the impact of forex volatility, noting that Bermaz in particular would be likely to raise the pricing of all its Mazda models as they group has exhausted its previously hedged yen exposure at around RM3.50:100 yen.

For Perodua however, it seems the market leader is rather undeterred by the weak ringgit as Aminar has stated that at this juncture, “Perodua will continue to absorb the weak ringgit’s impact and have no plans to review prices.”

Furthermore, the group has also revealed a higher capital expenditure of RM557 million compared to RM492 million in 2016 aimed to improve its manufacturing equipment, process flow, and productivity improvement at current plants.