PETALING JAYA: The local automotive sector’s earnings visibility remains strong, underpinned by a high booking backlog and strong consumer confidence that will be driven by a stable economy and healthy job market.
On a month-on-month (m-o-m) basis, the total industry volume (TIV) in November 2023 declined by 4% to 71,908 units. However, the figure still represented a 10% increase year-on-year (y-o-y).
Kenanga Research said car buyers were torn between enticing year-end promotions and an attractive line-up of new models in 2024.
“Cumulative 11-month 2023 TIV of 718,748 units (up by 12%) was within our expectation.
“The industry’s earnings visibility is still strong, backed by a booking backlog of 220,000 units that will keep the industry very busy for another three to four months.
“Looking ahead, we believe December 2023 TIV will hit another speed bump on a short production month from extended festive holidays,” the research house said in a report yesterday.
Kenanga Research said more than half of the backlog (220,000 units as at end-November 2023) consist of new models that reflects the appeal of new models to car buyers.
It expects 2024 to show a similar trend, given the equally strong line-up of new launches during the year.
“We believe a new car is still an affordable luxury for most Malaysian households despite the high inflation and a slowing global economy, underpinned by strong consumer confidence that is supported by a stable economy and a healthy job market.
“Moreover, the affordability of a motor vehicle is supported by stable new car prices thanks to the deferment of new excise duty regulations that could have resulted in prices of locally assembled vehicles increasing by 8% to 20%.
“There is also the potentially cheaper hire-purchase cost with the introduction of the reducing balance method in the calculation of interest charges, as well as attractive new models,” it said.
Currently, Perodua has more than 140,000 backlogged orders (up to 12 months for the Alza and Bezza, four months for the Ativa/Myvi and up to three months for others) while Proton has 31,100 backlogged orders (up to 12 months for the X50 and by three months for other models).
Looking ahead, while the upcoming fuel subsidy rationalisation is likely to impact the demand for mid-market models, Kenanga Research noted that it still remains optimistic on vehicle sales in the affordable segment.
“The buyers, that is the B40 group which is its main target market, will be spared the impact of subsidy rationalisation. They also could potentially benefit from the introduction of the progressive wage model,” it said.
With regards to the electric vehicle (EV) segment, Kenanga Research said the country is on track to meet the national target for EVs and hybrid vehicles to be 15% of TIV by 2030, and 38% of TIV by 2040.
“Vehicle sales will be supported by new EVs that enjoy sales and service tax exemption and other EV facilities incentives up to 2025 for completely-built-up and 2027 for completely-knocked-down.
“EVs’ new registration had leapt significantly for the past two years (from 274 units in 2021 to over 3,400 units in 2022 and 9,000 units by November 2023),” it said.
The recent new launches of BYD Seal and Tesla Model 3 with expected introduction of locally made first national EV (Perodua and Proton) in 2025 are garnering excitement within the EV space.
Kenanga Research’s top pick for the sector is MBM Resources Bhd with a target price of RM5.50. It projects a TIV of 710,000 units for 2024.
Meanwhile, TA Research said given that supplies of raw materials and parts can now catch up with demand, it expects the waiting period for new cars to shorten next year.
The research house’s TIV forecast for 2024 is maintained at 650,000 units.
Source: The Star