PETALING JAYA: Malaysia’s automotive sector is expected to see a 12% growth in total industry volume (TIV) to 560,000 units next year on the back of post-pandemic recovery in tandem with a 6.5-7% GDP growth projection for 2021, according to AmResearch.
It elaborated that consumer spending is expected to pick up next year with improved sentiments after the distribution of Covid-19 vaccines. Therefore, the research house expects consumer spending on big-ticket items such as passenger vehicles to improve.
“The Penjana SST exemption, which entailed a 100% and 50% sales tax (SST) exemption on locally assembled (CKD) and fully imported (CBU) car models respectively, is unlikely to be extended beyond Dec 31, 2020,” AmResearch said in a report.
In the coming quarters, it expects the Q1’21 TIV to be lower quarter on quarter (qoq), after a strong TIV reported in Q4’20, as purchasers take advantage of the discounts before the end of the SST exemption on Dec 31, 2020.
In the previous zero-GST “tax holiday” between June-August 2018 which saw a 3-5% reduction in car prices, total car sales fell 36% from 198,500 units to 126,800 units in the next three months.
The research house expects a similar trend for the post-SST exemption albeit the qoq is expected to be lower for the first quarter of next year, comparatively.
It also noted that the launch of a few new models like the Perodua D55L, and the deliveries of the X50 and Honda City CKDs, which have generated overwhelming bookings in 2020, should partially mitigate the sales drop for the quarter.
“Our channel checks revealed that additional cash rebates are unlikely in H1’21, other than the occasional festive promotional discounts as cash rebates will crimp margins. Instead, we expect auto players to be more inclined towards giving out non-cash goodies such as longer warranty periods and free labour charges for servicing.”
For Q2’21, it anticipated a stronger TIV sales volume by an average 45,000-50,000 units per month.
The research house believed that the worst is over, and that there will be gradual lifting of lockdowns, reopening of borders and travel restrictions which will improve businesses’ cash flows and reduce the disruptions to supply chains.
In addition to the GDP growth, it also anticipated a 0.6% decline in unemployment rate to 4.4% in 2021, which will be positive on consumer sentiment.
National automakers Proton and Perodua are expected to lead the sector as their fleets are priced attractively with superior value propositions compared to the mid-tier non-national brands. There have also been changes in distribution rights in the sector with Naza Group relinquishing Kia and the award of the sole distribution rights of Peugeot vehicles to Bermaz Auto.
“As the auto sector is very competitive, we expect more sector-wide collaboration/consolidation as this will boost sales volume and reduce costs – which will contribute positively to the companies’ earnings base,” AmResearch said.
In addition, it also projected that the overnight policy rate to be maintained at 1.75% for 2021, which will remain conducive for consumers to purchase new vehicles. Similarly, the stronger ringgit against the US dollar is also a positive for auto players’ profit margins.
Key companies that are likely to show positive surprises in profits benefiting from a stronger ringgit include Tan Chong Motor and UMW Holdings, as a substantial portion of their cost of goods sold, circa 60% and 40% respectively, are denominated in US dollars. This will lower their operating costs, consequently expanding their profit margins.
AmResearch remains overweight on the sector. Its top picks for the sector are MBM Resources and Sime Darby.
National automakers Proton and Perodua are expected to lead the sector. – BERNAMAPIX
Source: The Sun Daily
No comments:
Post a Comment