THE sustainability factor of September’s vehicle sales total industry volume (TIV) that rose 6.9% month-on-month to 56,444 units (August 2020: 52,800 units) is anybody’s guess amid a surge in COVID-19 cases that raises concerns over acquiring big ticket items.
Nevertheless, this is still the second highest TIV for 2020. The Malaysian Automotive Association (MAA) attributed the commendable performance to greater promotional activities by car manufacturers as well as higher production during the month.
Cumulatively, the nine-month TIV dipped 22.9% year-on-year (yoy) to 341,489 units (9M 2019: 442,985) with declines in both passenger cars to 310,008 units (-23.3% yoy) and commercial vehicles to 31,481 units (-19.0% yoy).
Moving forward, TA Securities Research expects a weaker month-on-month performance in October due to the implementation of the recent implementation of conditional movement control order (CMCO) in Sabah, Labuan, Selangor, Kuala Lumpur and Putrajaya and weaker consumer sentiment stemming from the expiry of the loan repayment moratorium in end-September.
“Meanwhile, we foresee the production facility of Proton to be affected as some of its employees from the Engineering Division in Shah Alam have tested positive for COVID-19.
“The rapid escalation in COVID-19 cases nationwide may dampen the recovery of vehicle sales. Our 2020 TIV of 488,000 units (-19% yoy) is currently under review,” wrote analyst Angeline Chin.
All-in, the research house maintained its “neutral” recommendation on the sector as stringent hire-purchase loan requirements and increased competition that results in thin margin will continue to weigh on the automotive sector.
CGS-CIMB Research also maintained its “neutral” rating on the sector in view of the CMCO and loan moratorium expiry but expects key launches such as Honda City and Nissan Almera to help to drive TIV in 4Q 2020.
Likewise, the rolling out of the Proton X50 which have received over 20,000 bookings since mid-September could also be a major driver for TIV in 4Q20F.
“Meanwhile, potential sales tax holiday extension, and delay in the implementation of the open market value methodology for vehicles in the upcoming Budget 2021 announcement (scheduled for early-Nov) could help to retain the TIV growth momentum into 2021F,” opined analyst Mohd Shanaz Noor Azam.
However, AmBank Research has retained its “overweight” stance on the automotive sector with an unchanged TIV projection of 500,000 units this year.
“We expect the strong sales volume momentum to sustain for 4Q 2020, bolstered by the implementation of the sales and service tax (SST) holiday from June 15 until Dec 31 this year.
“We believe the SST exemption will continue to spur buying interests for passenger vehicles, especially the national brands Proton and Perodua,” added the research house. – Oct 21, 2020
