The automotive industry saw its first year-on-year (yoy) growth in units sold in June, underpinned by the tax holiday with national brands taking up a fairly large amount of market share, according to MIDF Research.
According to the Malaysian Automotive Association, June’s total industry volume (TIV) registered at 44,695 units, representing a 5.1% yoy and a 95% month-on-month (mom) growth,” MIDF Research analyst Hafriz Hezry said in a note today.
The analyst also noted that June, which marks the second month of the recovery movement control order (RMCO), also reflects the first half-month impact of the tax holiday for car purchases. The tax holiday comes as part of the Short Term Economic Recovery Plan, and began on June 15.
“A detailed breakdown of performance by marque will only be available next month, but the national cars seem to have taken a fairly large amount of market share,” added Hafriz, noting that Perodua had also launched its own discount programme about a week before the tax holiday.
Hafriz also believes the recovery in June is a sign of a stronger second half of 2020 for the industry, pointing to the example of 2018’s 3-month tax holiday, which lifted TIV during the period by about 21,000 units per month. Still, the analyst is sticking to a FY20F target of 554,000 units, which represents a yoy contraction of 8.3%
“The 3-month tax-holiday in 2018 lifted TIV during the period by about 21,000 per month, an increase of 32% against pre-tax holiday levels, relative to our conservative assumption of a 7,800 per month increase against our base FY20F assumption from the 2H20 tax holiday,” said Hafriz.
The analyst also noted that these early trends of a recovery are very encouraging, pointing to a strong combination of demand induced by the tax holiday, the robust liquidity of consumers from the various stimulus measures which put “massive amounts of cash” into consumer pockets, and a low interest rate environment as strong catalysts to drive a rebound.
As such, Hafriz reaffirms a sector call of positive, with Bermaz Auto Bhd and UMW Holdings Bhd as top picks.
Bermaz sees a buy call with a target price of RM1.95, while UMW has a buy call with a target price of RM3.40.
At 11am, Bermaz’s shares were last done at RM1.38, up a sen, while UMW’s shares were last done at RM2.46, down 3 sen.
