2013-12-27 09:36:03 - Recently published research from Business Monitor International, "Malaysia Autos Report Q1 2014", is now available at Fast Market Research
In line with our view that auto sales will enjoy a tailwind from promotions and the launch of new models in H213 (see 'Passenger Car Sales Will Get Promotional Lift In H213', July 24), vehicle sales have indeed been posting stronger growth in the past few months, as buyers took advantage of the festive season and the launch of new models.
We believe vehicle sales will remain buoyant for the rest of 2013 as consumer sentiment continues to remain positive. Indeed, as we previously highlighted, the recently concluded elections in May 2013, which brought the ruling government back into power, have brought stability back into the market. Furthermore, automakers are expected to hold year-end marketing campaigns, which we see as
providing a nice tailwind for vehicle sales, keeping them firmly in line to meet our 2013 growth forecast of 4.1%, to 653,000 units.
Full Report Details at
Risks To 2014 Sales Outlook
One risk to auto sales is the end of the import and excise duties exemption for hybrid cars. These incentives are slated to expire on December 31 2013. The exemption in duties has allowed hybrid car sales to grow strongly since 2010, with Toyota Motor and Honda Motor introducing new models to take advantage of the policy.
While only 332 hybrids were sold in 2010, sales for the first seven months of 2013 came in at 8,571 units, highlighting the positive impact of the hybrid incentives. Although the Malaysian Automotive Association (MAA) is lobbying the government to extend the tax incentives on hybrids beyond 2013, the government is keen to promote domestic production of fuel efficient vehicles, and may choose to instead provide manufacturing incentives for hybrid cars in its upcoming revised National Automotive Policy. While this will be positive for vehicle production in the medium- to long term, sales will experience a slight dip as imported hybrid cars become more expensive.
Long-Term Auto Sales Forecast
On a long-term basis, BMI remains positive on the outlook for the Malaysian auto industry, Strong consumer sentiment will continue to drive passenger car (PC) sales over our 2013-2017 forecast period, with the country's ongoing Economic Transformation Programme (ETP) - a government-led initiative to transform Malaysia into a developed nation by 2020 through investments in key economic sectors -ensuring a steady demand for commercial vehicles (CVs). In 2017, BMI is currently forecasting a total of 799,061 vehicles to be sold in Malaysia, made up of 703,996 PCs and 95,061 CVs.
Auto production growth has been on a similar trajectory as sales with vehicle production in September 2013 rising 7.8% y-o-y, to 54,017 units bringing 9M13 output to 439,868 units, an increase of 3.5% y-o-y. With output in both the passenger car and CV segment growing in line with our forecast, we are happy to maintain our 2013 auto production growth forecast of 4.7%, to 596,000 units.
Another development that informs our bullish outlook on the sector is the recent upgrade in Malaysia's ranking from 8th place to 6th in World Bank's Doing Business 2014 Report (see 'Improving Business Environment To Boost Investment', November 11). We see the country continuing to attract more value-added production investments in the auto sector. Indeed, the government has indicated that it wants to become the leader in eco-car production for South East Asia and will unveil new auto policies in its NAP review in 2013. Given that eco-car production requires a higher degree of skilled labour, as well as modern technology, Malaysia's inherent advantages of these attributes in its auto market will prove beneficial in attracting such investments, especially if its upcoming NAP contains attractive incentives.
With vehicle production lagging total demand in the past few years, imports have had to satisfy much of market demand. However, with the right incentives in place under the NAP, we see vehicle production growth outpacing sales growth in the next few years as more carmakers set up domestic production facilities to circumvent higher import taxes and take advantage of Malaysia's conducive business environment. Over the 2013-2017 period, we forecast vehicle production to grow at an annual average of 5.9%, to hit 760,000 units in 2017.
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