THERE is high likelihood of the automotive sector posting a turnaround in 2022 despite a dismal lockdown-induced performance this year.
Kenanga Research, which maintained a “neutral” outlook on the sector with an unchanged 2021 total industry volume (TIV) target of 460,000 units (-13%), expects a strong recovery next year with a TIV target of 600,000 units (+30%).
The 600,000 units target is closely in line with the Malaysian Automotive Association’s (MAA) TIV target of 605,000 units (+21%).
“Our 2022 TIV growth will be driven by the expected recovery in economy post lockdown and the assumption that herd immunity would be achieved by then,” justified analyst Wan Mustaqim Wan Ab Aziz in a sector update.
“This would inevitably result in relaxation of standard operating procedures (SOPs) toward revitalising local travel which should push demand for passenger vehicles especially the affordable national marques.
“Additionally, a few automakers have assured commitment to absorb the sales and service tax (SST) beyond December 2021.”
Kenanga Research’s projection came amid MAA reporting a 7M 2021 total industry volume (TIV) of 256,215 units (+10%) which is within the research house’s expectation at 56% of its 2021 TIV target of 460,000 units as it expects stronger recovery moving forward with re-opening of the economy.
To re-cap, economic activities including sales and production of motor vehicles have re-commenced under the National Recovery Plan Phase 1 starting Aug 16 which should drive car sales recovery – especially in key states of Selangor and Kuala Lumpur – with the growing number of back-logged bookings for popular models.
CGS-CIMB Research also retained its “neutral” outlook on the automotive sector as valuations reflect weaker sector earnings delivery in 2Q 2021F and 3Q 2021F amid unfavourable forex movements due to the depreciation in ringgit against the greenback.
Nevertheless, the research house is keeping its 500,000 TIV forecast for 2021F which is in line with MAA’s TIV sales target for this year.
“Our 500,000 TIV forecast implies a 5.6% year-on-year (yoy) decline in 2021F due to sales volume falling 3% and 10% yoy for national and non-national brands respectively,” opined analyst Mohd Shanaz Noor Azam.
“While we foresee improving TIV in August-September due to reopening of the auto sector, we still expect 3Q 2021F TIV to contract by 7% quarter-on-quarter (qoq) and 41% yoy.” – Aug 23, 2021
