Forecast drop in TIV likely at the expense of midmarket models
The forecasted contraction for total industry volume (TIV) in 2024 is expected to hurt mid-market vehicle models while the affordable segment will likely be unaffected.
In a sector update report, the research arm at Kenanga Investment Bank Bhd (Kenanga Research) guided that for 2024, they are projecting the auto sector’s TIV to contract to 710,000 units.
This translates to a 11 per cent contraction from the 800,000 units registered in 2023 and is a more conservative forecast compared to the Malaysia Automotive Association’s 2024 TIV forecast of 740,000.
According to the analyst, the double digit TIV contraction will likely be at the expense of mid-market models as the impending fuel subsidy rationalisation is expected to affect the mid-market segment’s target customers, the M40 group.
With anticipated higher fuel costs for the M40 group, the target market may hold back from buying a new car or even downgrade to a smaller car to cut their fuel bills.
Meanwhile, Kenanga Research believes that it will be “business as usual for the affordable segment as its target customers, the B40 group, will be spared the impact of the impending fuel subsidy rationalisation and also could potentially benefit from the introduction of the progressive wage model.
With that in mind, Kenanga Research who maintains a neutral call on the automotive sector still reckons that the automotive industry earnings visibility is still good as it is backed by a booking backlog of 200,000 units at the end of Feb.
“More than half of the backlog is made up of new models, alluding to how appealing new models are to car buyers. This trend is likely to persist throughout 2024 given a strong line-up of new launches,” said the research arm.
For new models, Perusahaan Otomobil Kedua Sdn Bhd (Perodua) is expected to launch in April the Perodua D66b SUV which is built on the latest Daihatsu New Global Architecture (DNGA) platform.
“It will give the B-segment offerings of its competitors a run for their money including Proton X-50, Honda City Hatchback and Toyota Yaris Cross which also has a tentative launch date also in April,” Kenanga Research noted.
In the space of non-national brands, that automakers have begun shifting away from the highly competitive low-margin segment 7-seater SUVs towards more premium products.
‘Meanwhile, excitement is building in the electric vehicle (EV) segment with the new launches of BYD Seal and Tesla Model 3 Highland with expected introduction of locally-made first national EV in 2025,” the research arm added.
Sales of EVs in the market are expected to be supported by these new launches which will enjoy SST exemption and other EV facilities incentives up to 2025 for CBUs and 2027 for CKDs.
EV registrations have increased rapidly from 274 units in 2021 to 3,400 units in 2022 and to 10,159 units in 2023.
Based on this growth rate, Kenanga Research reckoned that the sector will be on track to meet the national target for EVs and hybrid vehicles to constitute over 15 per cent of TIV by 2030.