Auto sector kept in neutral gear

POSTED BY ON 22 January 2016

THE Malaysian automotive industry posted its fifth consecutive month of growth, with last December witnessing a 7 percent rise year-on-year to 69,401 units.

However, this will be “short-lived” as vehicle sales are inflated by pre-price hike purchases, according to MIDF Research.

“The automotive industry recorded a growth in the total industry volume for the fifth consecutive time, but this is inflated by consumers bringing forward purchases ahead of the price hikes from early 2016,” it said in its note to Cars Bikes & Trucks this week.

“Year-end promotions are also driving this demand rush, which we expect to be short-lived. Indications are that sales demand has dried up due to weaker than usual pre-Chinese New Year sales volumes.”

The year-to-date TIV of 666,674 units represents a flat growth against 2014’s 666,487 units. This is slightly ahead of MIDF’s estimate of 659,800 units.

In saying so, the research firm forecasts a “conservative” 666,000 units sold for 2016, which still represents a “flattish growth against actual 2015’s TIV.”

“However, we remain cautious given the upcoming price hikes and the steep cost inflation driven by a worsening forex environment. The Malaysian Automotive Association’s prediction of a 2.5 percent year-on-year contraction to 650,000 units for 2016 underpins our bearish view,” it added.

On a similar note, Toyota and Honda are going neck-to-neck in their bid to lead the non-national segment, but the latter accomplishes a structural cost advantage being one of the earlier qualifiers of the Energy Efficient Vehicle program.

Mazda emerged as the best sales performer in December 2015, registering a 62 percent year-on-year growth. Honda and Toyota came in at second and third place respectively, posting a 30 percent and 18 percent growth year-on-year individually.

“It is a similar trend on a full year basis, with Mazda and Honda outperforming the rest. Both marques have been pretty aggressive with new model introductions. Honda launched the HRV compact SUV whereas Mazda introduced the B-segment model Mazda2 as well as the Mazda3 CKD,” MIDF noted.

“Toyota has seen gradual recovery in sales since August 2015 but on a full year basis, is still down by 8 percent.”

The declining of the Ringgit value is expected to have a more pronounced impact on sector earnings this year. The Ringgit now stands at 4.38 against USD1.

“The sector aggregate earnings are expected to decline further by 3 percent this year,” the firm added.


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