2013-09-22 08:58:04 - New Transportation market report from Business Monitor International: "Malaysia Autos Report Q4 2013"
Over H113, new vehicle sales grew by 4% year-on-year (y-o-y), to reach 313,418 units, according to figures from the Malaysian Automotive Association (MAA). This headline figure was made up of 275,991 passenger cars, up 3.8%, and 37,497 commercial vehicles, up 6%. Although the passenger car segment underperformed the CV segment, BMI is happy to maintain its 2013 passenger car sales growth forecast of 4.1%, to 574,829 units.
In line with our view, vehicle sales slowed down considerably in the past few months after their strong start to the year. One possible reason for this slowdown could have been that consumers waited to see how the ruling coalition, which won the May 2013 elections, would follow through on its promise of lowering
car prices. Election uncertainty was a risk we highlighted back in March, which prompted us to downgrade our sales forecast at that stage.
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With regards to government policy, it will not be until the release of the National Automotive Policy (NAP) in H213, that we will get greater clarity on the government's strategy for the country's auto sector. Should car sticker prices fall in the coming months, it will be due to discounts provided by carmakers and not any specific government policy.
The commercial vehicle (CV) segment outperformed the passenger car segment for the first half of 2013, as H113 CV sales grew by 6.0%, to 37,497 units. However, we expect base effects of H212 to pose a drag on sales in the latter half of 2013, which has prompted us to downgrade our full-year CV sales growth forecast to 4.0%, to 78,587 units, from 6.0% previously.
On the other hand, we expect the passenger car segment to stage a comeback in H213 and improve on its H113 performance, when sales grew by just 3.8% y-o-y. With aggressive sales campaigns and new model offerings by dealers on the cards, we expect many consumers who have sat on the sidelines recently to jump in and make a purchase. Furthermore, the upcoming festive month sales promotions will further provide a lift to car sales. Therefore, we are happy to maintain our 2013 passenger car sales growth forecast at 4.1%, to 570,000 units.
This will then revise our total vehicle sales forecast to 4.1%, to 653,415 units, from 4.3% previously. One risk to our upbeat view on passenger car sales for H213 comes from the recent tougher lending restrictions imposed on banks by Bank Negara Malaysia (BNM). This could have the effect of further tightening consumer credit (which would affect auto loans) due to a more stringent loan approval process. That said, our conservative car sales growth forecast does provide some margin for such a scenario.
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 sales over the forecast period, with the country's ongoing Economic Transformation Program (ETP) - a national policy aimed at developing Malaysia's infrastructure - set to ensure a steady demand for CVs.
In 2017, BMI is currently forecasting a total of 908,721 vehicles to be sold in Malaysia, made up of 799,513 PCs and 109,208 CVs.
Over H113, Malaysian vehicle production stood at 293,511 units, up by 4.1%. Although passenger car production continued to show strong growth, up by 5.7%, at 264,487 units, commercial vehicle production dropped sharply, by 8.9%, to 29,024 units. According to the MAA, the main reason behind the fall in CV output was 'due to stock constraints on some pick-up models', with pick-up production having dropped by 13.6% y-o-y as a result. The MAA also stated that CV output in H112 had remained at a high base, with output having not been affected by the Thai flooding of late 2011/early 2012.
This disappointing H1 figure could lead to further reductions in BMI's short-term production outlook, having already revised down its 2013 vehicle production forecast slightly earlier this year, from growth of 10%, down to 7.7%. However, on a long-term basis, we remain bullish, forecasting average annual growth of 7.3% over the 2014-2017 period, to reach in excess of 810,000 units.
Backing up our optimism are continued announcements of fresh investment into Malaysian vehicle production. In July 2013, Hino Motors carried out the groundbreaking ceremony for its MYR140mn manufacturing plant, established as a joint venture with local company MBM Resources Bhd (MBMR), in Sendayan Tech Valley. The plant will have an annual capacity of 10,000 units and is scheduled to be completed at the beginning of 2014. It will produce Hino trucks (small, medium and heavy duty) and buses for the domestic market.
This followed the announcement in June 2013 that Chinese automaker Chery Holdings plans to invest some US$300mn to set up an assembly plant in Malaysia 'within five years'. According to Chery CEO, Paul Ng, Malaysia is to become a regional hub for exporting right-hand drive cars across South East Asia. At present, Chery has over 50 dealerships in Malaysia.
At the mid-point of 2013, local carmakers Perodua and Proton remain the dominant players in the Malaysian new passenger car sales market. Perodua sold 96,873 passenger cars in the country over H113, for a market share of 35.1%, with Proton in second place on 64,782 units (23.5% share). In third place is Japanese automaker Toyota, on 29,488 units (10.7%).
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