Automotive sector
Maintain underweight: Total industry volume (TIV) for 2011 of 600,308 units (+0.4% year-on-year [y-o-y]) with sequentially softer December sales (-2% month-on-month [m-o-m]) met our and street expectations.
We expect auto sales growth to be uninspiring at 1% to 2% in 2012 as domestic automotive demand nears saturation.
Margin pressure is expected to set in on unfavourable exchange rates coupled with price discounting among players to regain market share post the Thai floods. In the absence of an immediate catalyst, the auto sector remains an “underweight”. Hold UMW Holdings Bhd and MBM Resources Bhd, “sell” Tan Chong Motor Holdings Bhd.
Auto sales contracted 2% m-o-m to 47,708 units in December, in line with consensus expectations. The non-national marques were the major losers in December as sales fell 13% m-o-m to 18,684 units, while national models fared better (+7% m-o-m to 29,024 units).
Honda’s sales were the hardest hit among the major marques; sales fell 66% m-o-m to a mere 635 units in December. Honda’s plants in Malacca and Thailand were badly affected by the flood situation in Thailand.
Toyota’s sales were also affected (-30% m-o-m to 5,614 units), followed by Proton (-4% m-o-m to 10,812 units). Conversely, Perodua and Nissan reported higher sales in December, up 14% and 1% on a monthly basis respectively.
We expect auto companies to report poor January to March 2012 sales figures, as they absorb the adverse effects of the disrupted supply chain.
With production everywhere still at sub-par levels, the majority of distributors will be reliant on fast-depleting inventories to support sales commitments.
Margins will be under pressure, crimped by the rise in completely-knocked-down (CKD) component costs on the stronger US dollar and yen against the ringgit.
The tightening in hire purchase (HP) financing will impact auto sales, as lenders become more cautious due to the recent uptick in non-performing HP loans.
Against this backdrop, we are keeping our 2012 TIV forecast of 1% to 2% growth unchanged. Overall, Perodua is set to retain its position as the best-selling marque, attributable to consumer preference for smaller autos (market share: 34.7% at end-October 2011).
Passenger vehicles in the compact car category (Myvi and Saga) will continue to dominate sales volumes. We see growth potential for hybrid and electric cars, which currently account for 1.2% of TIV, as exemptions from import and excise duties (effective until December 2013) make them more affordable. — Maybank IB Research, Jan 18
This article appeared in The Edge Financial Daily, January 19, 2012.
Maintain underweight: Total industry volume (TIV) for 2011 of 600,308 units (+0.4% year-on-year [y-o-y]) with sequentially softer December sales (-2% month-on-month [m-o-m]) met our and street expectations.
We expect auto sales growth to be uninspiring at 1% to 2% in 2012 as domestic automotive demand nears saturation.
Margin pressure is expected to set in on unfavourable exchange rates coupled with price discounting among players to regain market share post the Thai floods. In the absence of an immediate catalyst, the auto sector remains an “underweight”. Hold UMW Holdings Bhd and MBM Resources Bhd, “sell” Tan Chong Motor Holdings Bhd.
Auto sales contracted 2% m-o-m to 47,708 units in December, in line with consensus expectations. The non-national marques were the major losers in December as sales fell 13% m-o-m to 18,684 units, while national models fared better (+7% m-o-m to 29,024 units).
Honda’s sales were the hardest hit among the major marques; sales fell 66% m-o-m to a mere 635 units in December. Honda’s plants in Malacca and Thailand were badly affected by the flood situation in Thailand.
Toyota’s sales were also affected (-30% m-o-m to 5,614 units), followed by Proton (-4% m-o-m to 10,812 units). Conversely, Perodua and Nissan reported higher sales in December, up 14% and 1% on a monthly basis respectively.
We expect auto companies to report poor January to March 2012 sales figures, as they absorb the adverse effects of the disrupted supply chain.
With production everywhere still at sub-par levels, the majority of distributors will be reliant on fast-depleting inventories to support sales commitments.
Margins will be under pressure, crimped by the rise in completely-knocked-down (CKD) component costs on the stronger US dollar and yen against the ringgit.
The tightening in hire purchase (HP) financing will impact auto sales, as lenders become more cautious due to the recent uptick in non-performing HP loans.
Against this backdrop, we are keeping our 2012 TIV forecast of 1% to 2% growth unchanged. Overall, Perodua is set to retain its position as the best-selling marque, attributable to consumer preference for smaller autos (market share: 34.7% at end-October 2011).
Passenger vehicles in the compact car category (Myvi and Saga) will continue to dominate sales volumes. We see growth potential for hybrid and electric cars, which currently account for 1.2% of TIV, as exemptions from import and excise duties (effective until December 2013) make them more affordable. — Maybank IB Research, Jan 18
This article appeared in The Edge Financial Daily, January 19, 2012.
