Strong line-up of launches, backlog to boost auto sector

KUALA LUMPUR: Kenanga Research expects the automotive sector to experience a similar 2023 trend given an equally strong line-up of launches this year.

The industry’s earnings visibility is still strong, backed by a 200,000-unit booking backlog as at end-December 2023, with more than half of it comprising new models, underscoring the appeal of new models to buyers, it said in a note today.

The research firm also projected a total industry volume (TIV) of 710,000 units this year, slightly lower than the 740,000 units projected by the Malaysia Automotive Association (MAA).

Meanwhile, in the electric vehicle (EV) segment, excitement is building up with BYD Seal and Tesla Model 3 launches and the expected introduction of the first locally-made national EV in 2025, Kenanga said.

“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 and supported by a stable economy and a healthy job market,” it said.

The positive sentiment is also supported by the affordability of vehicles underpinned by stable new car prices, thanks to the deferment of new excise duty regulations and potentially cheaper hire purchase cost with the introduction of the reducing balance method in interest calculations, and attractive new models.

“However, we acknowledge that the impending fuel subsidy rationalisation is likely to hurt the demand for mid-market models, while remaining optimistic on vehicle sales in the affordable segment as buyers, such as the B40 group, being the main target market, will be spared the impact of subsidy rationalisation, and could also potentially benefit from the introduction of the progressive wage model,” it said.

Meanwhile, in a separate note, RHB Research forecast the TIV to be at 625,000 units, in line with the 10-year average, based on a lack of compelling factors for 2024 auto sales to book another high.

“Furthermore, the robust car sales in the last two years reflected delayed purchases of big-ticket items from the 2020-2021 pandemic years, which was further boosted by the sales tax holiday.

“The launch of lower-priced models in the last two years such as the facelifted Perodua Myvi, the all-new Axia, and the 2022 Proton Saga also raised the demand for national cars,” it said.

RHB Research is maintaining a “neutral” call on the sector and will stay cautious on the 2024 outlook, premised on a lack of catalysts to drive sales and earnings to a new high. – BK