Malaysia’s automotive sector to see earning surge in 3Q18
KUCHING: Malaysia’s automotive sector could see its strongest quarter in the third quarter of 2018 (3Q18), driven by strong volumes, better margins, and the stronger ringgit seen in the first half of 2018 (1H18).
Maybank Investment Bank Bhd’s research arm ( Maybank IB Research) in a recent report, opined: “We believe that auto players would likely report their strongest quarterly results of the year in 3Q18, underpinned by volume surge in July to August and better margins from lower A& P expenses ( less incentives to induce purchases due to GST zero-rating) while still enjoying benefits of a stronger ringgit in 1H18 (due to forward hedging policies employed).
“We understand that most popular mass market models have been fully booked up to September. As for car dealers/distributors with excess inventories (which are Nissan, Proton), dated models may be cleared as well in this period.”
Meanwhile, Kenanga Investment Bank Bhd’s research arm ( Kenanga Research) believed that sales volume for June 2018 is expected to be higher than May 2018, following the implementation of zero-rated GST on June 1, 2018 (at an average of circa six per cent reduction in car prices) as well as supported by the Hari Raya festive season promotional campaigns.
“Furthermore, sales volume until August 2018 is expected to be boosted by the zero-rated GST tax holiday transition period until the new SST is gazetted (expected on September 1, 2018), which may increase car prices across the marques depending on the new mechanism,” it added.
Meanwhile, on the performance of the automotive sector in May, the research team noted that May 2018 registered sales of 42,983 units (down nine per cent m- o-m, down 15 per cent y- o-y).
“The weaker car sales both mo-m and y- o-y were attributed to consumers holding back purchases prior to the implementation of zero-rated GST on June 1, 2018, which saw at an average six per cent reduction in car prices across the board,” Kenanga Research.
It further noted that the passenger vehicles segment (down four per cent m- o-m, down 11 per cent y- o-y), both lower m- o-m and y- o-y sales were attributed to the weaker car sales across the board, except for Perodua (up 10 per cent m- o-m, up 28 per cent yo-y) which still stood strong from the front-loaded booking of all-new Perodua Myvi, whereas Nissan’s (up 58 per cent m- o-m, down 15 per cent y- o-y) strong m- o-m sales was from the front-loaded booking of all-new Nissan Serena S-Hybrid, which was launched in early May 2018.
Maybank IB Research said, in the next three months, it expected that sales could surge to an average monthly volume of 60,000 units.