DESPITE the Malaysian Automotive Association (MAA) reported a monthly rebound of almost 150% in August’s total industry volume (TIV) to 17,500 units (-68% year-on-year [yoy]), analysts are generally wary of the outlook of the automotive sector.
Retaining its “neutral” stance on the sector, RHB Research foresees downside risks to the sector’s recovery which include persistent shortages of key components and delays in new model launches.
“With the mutating COVID-19 virus, we cannot rule out further rolling lockdowns ahead thereby posing a downside risk as well,” cautioned analyst Eddy Do Wey Qing in a sector update.
“Other downside risks include the tightening of bank approval for car financing and sharp weakening of the ringgit. On the contrary, upside risks include easing of supply chain disruptions, stronger-than expected demand for new vehicles, and favourable FX (foreign exchange) movements.”
As of Aug 16, car showrooms and assembly plants – previously deemed as non-essential – were allowed to resume operations, with the former opened to fully vaccinated patrons. Perodua registered 6,988 units in August, followed by 2,741 and 2,524 units from Proton and Toyota.
August’s TIV brings year-to-date (YTD) TIV to 273,757 units (-4.4% yoy) or 55% of RHB Research’s FY2021F TIV.
“We maintain our FY21F TIV of 500,000 units (-5.6%) in line with MAA’s TIV forecast,” noted the research house.
“We think this is achievable, premised on the assumption that sales for the remaining months (September-December) can achieve 90-95% of the monthly sales of FY20 – supported by the last leg of the sales & service tax (SST) exemption.”
Hong Leong Investment Bank (HLIB) Research is also “neutral” on the automotive sector despite August’s TIV rebound.
“We expect TIV to rebound in coming months as original equipment manufacturers (OEMs) ramp up production to cater for the strong demand prior expiry of SST exemption by end-2021,” projected analyst Daniel Wong.
“However, the situation remains fluid post SST exemption expiry by end 2021 (potentially extend into 2022) and constraint by global microchips supply shortage.”
Kenanga Research also retained its “neutral” outlook on the automotive sector with an unchanged 2021 TIV target at 460,000 units (-13%) but expects a strong recovery next year with a 2022 TIV target of 600,000 units (+30%).
“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, inevitably resulting in relaxation of standard operating procedures (SOPs) toward revitalising local travel which should push demand for passenger vehicles especially the affordable national marques,” justified analyst Wan Mustaqim Bin Wan Ab Aziz.
“Additionally, a few automakers have assured commitment to absorb SST beyond December 2021.” – Sept 23, 2021
