Post Raya blues for auto market

by **Cals** Wed 24 Sep 2014, 02:31

Business & Markets 2014

Written by RHB Research

Tuesday, 23 September 2014 09:51

Automotive sector
Maintain “neutral” call. According to data from the Malaysian Automotive Association (MAA), auto sales for August slumped 15.2% month-on-month (m-o-m) to just 51,125 units (flat year-on-year (y-o-y). Cumulative total industry volume (TIV) for the eight months to August reached 444,534 units, up 2.7% y-o-y. Most distributors recorded softer vehicle deliveries during the month and we attribute this to the stronger vehicle sales in the months leading up to the Hari Raya Aidilfitri holidays in late July. In addition, sales of both national car marques were unusually weak in anticipation of the launches of two important new models this month.
Proton’s and Perodua’s sales for August declined 22.0% and 23.8% m-o-m respectively. We believe this is due to the anticipated launch of the B-segment Proton Compact Car (PCC) scheduled for Thursday. The Perodua Axia A-segment model was officially launched on Sept 15, with four variants priced between RM24,600 and RM42,530. We understand that production of the older Perodua Viva has ceased, with stocks exhausted as channel inventories are refreshed with the new Axia model. Initial media reports suggest that both the PCC and the Axia look like they will be competitive in their respective segments.
We understand Perodua has received 13,500 bookings for the Axia in the first month since it began taking orders. Deliveries of the new national car models should ramp higher in the fourth quarter of 2014 and make up for the transitional weakness. The broader market saw slightly weaker vehicle deliveries following the Aidilfitri sales promotion frenzy. Honda’s sales were flat m-o-m while Toyota’s eased 6.3%. Nissan’s sales fared the worst among the Big Three (-17.7% m-o-m, -27.1% y-o-y and year-to-date [YTD] -18.5%) as its Almera suffered from the onslaught of newer rival models. Mazda’s sales displayed steady improvement (YTD +14.1%).
Although we expect September to be another transitional month for both Proton and Perodua, the underlying demand remains firm. The main risk for national car sales is the rate of financing approvals.
We reiterate our 2014 TIV forecast of 675,000 units considering the YTD sales and new model pipeline. — RHB Research, Sept 22

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This article first appeared in The Edge Financial Daily, on September 23, 2014.
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