Automotive sector’s 2017 TIV garners mixed views
KUALA LUMPUR: The automotive sector’s 2017 total industry volume (TIV) garnered mixed views, either coming in below or meeting analysts’ expectations on the back of lower-than-expected December sales.
According to the Malaysian Automotive Association (MAA), sales volume in December 2017 was at 54,729 units, 15.6 per cent or 10,104 units lower than the similar corresponding month in 2016.
Sales volume for the year 2017 amounted to 576,635 units, down from 580,085 from the year earlier.
The association noted that this was due to the impact of floods in certain states in Peninsular Malaysia and the excessive offers by car companies which started much earlier than expected in 2017.
The 2017 TIV was below the research arm of Kenanga Investment Bank Bhd’s (Kenanga Research) expectation at 97 per cent of Kenanga Research’s TIV forecast at 590,000 units.
Kenanga Research attributed the lower 2017 TIV growth to the lower-than-expected December sales (December 2017 volume at nine per cent of the total TIV from average December sales of 11 per cent).
“Sales volume for January 2018 is expected to be lower than December 2017 with the termination of year-end promotional events and recovery period from the floods,” it said.
Therefore, the research arm cut its 2018 year-end target to 590,000 units, from 600,000 units, previously. This was in line with MAA’s current 2018 TIV target of 590,000 units, from 619,000 units, previously.
However, for the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), the 2017 TIV was broadly within its expectations accounting for 98 per cent of its 2017 estimates.
MIDF Research kept its financial year 2018 forecast (FY18F) TIV growth forecast of 1.7 per cent year on year (y-o-y), though the actual number was tweaked down slightly to 586,000 given a slightly lower base in 2017.
“December TIV represented a 16 per cent y-o-y decline - year-end sales this time around seem to be a lot weaker than usual.
“Industry production dropped by a much larger 26 per cent yo-y,” it said.
MIDF Research highlighted that while on the surface it might look as though consumer demand is weaker now, on the flip side, the numbers might suggest that the deep discounting in the market in the past two years is being rolled back as inventories in the system normalises.
The research arm further highlighted that sales-to-production ratio in 2017 in particular, has constantly been more than 100 per cent and above a historical average of 110 per cent.
“This indicates the industry is selling a lot more than it is producing and suggests inventories have been driven down quite substantially throughout 2017.”