Demand rush spurs TIV growth

POSTED BY ON 22 December 2015

THE Malaysian automotive industry recorded its fourth consecutive month of total industry volume (TIV) growth, driven by the surge in vehicle sales ahead of the anticipated price hikes beginning January 2016, said research firm MIDF Research.

“Our ground checks suggest consumers are rushing to lock in purchases ahead of the planned price hike from January 2016, while year-end promotions are also driving this demand rush, which we expect to be short-lived,” it said in its note to Cars Bikes & Trucks recently.

As at today, the TIV stands at 597,230 units. MIDF Research predicts the year 2015 to close at “circa 655,000 to 659,000 units”.

“We would be more wary of the market drying up from early 2016 as consumers are bringing ahead purchases, and taking cue from the after-effects of the pre-GST buying rush earlier this year, which saw TIV falling between 8 to 23 percent in subsequent months,” MIDF Research said.

Compounding the problem is the weak value of the Ringgit, which is expected to have a more pronounced impact on sector earnings in year 2016.

“We project a conservative 1 percent growth in TIV at 666,000 for 2016, but we remain cautious given the upcoming price hikes and the steep cost inflation driven by a worsening forex environment.”

On another note, MIDF Research noted a stiff competition in the non-national car segment, with Toyota and Honda remaining well ahead of other foreign manufacturers.

“Toyota now commands the larger share in November, but on a cumulative basis, Honda is still the largest non-national make thus far in 2015,” the firm said.

Last month, Toyota and Honda sold 9,533 and 9,240 units respectively.

It added: “Honda and Mazda attain a structural advantage in them being some of the first qualifiers of the energy efficient vehicle programme, giving it a significant cost – in this case, duty cost – and pricing advantage over other non-nationals.”

On the other hand, the national car segment has been “deteriorating”, according to the firm. In November, the national car TIV sank by about 10 percent year-on-year.

Proton sold 7,169 units last month, whereas Perodua sold 16,932 vehicles.

“Nonetheless, the national cars are positioned in a price sensitive segment and we think this would be worst hit by any reduction in disposable income,” MIDF research highlighted.

“A similar situation was observed in 2012 when the responsible lending guidelines were introduced which saw national makes being the worst impacted, registering a contraction of 2.5 percent in volumes versus a 14 percent rise for the non-nationals during the year.”

MIDF Research is maintaining the automotive sector in neutral gear, considering the persistently weak Ringgit and a “muted demand outlook”.

“Our top sector pick is Berjaya Auto. While there is considerable pressure from the stronger Japanese yen, earnings is buffered by model mix expansion,” it said.

The Mazda CX3 and the upcoming Mazda 6 CKD are expected to expand margins and dilute contribution from the lower margin Mazda 2, it further added.

MAA November 2015 MAA November 2015




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