Auto sales seen falling 4% over next two weeks

PETALING JAYA: Sales in automotive sector may decline 4% during the current movement control period, with further downside if the restriction is extended.

This is because new bookings, after-sales services and vehicle delivery process are expected to be impacted by the closure of showrooms and dealerships, according to CGS-CIMB Research.

“Our channel checks with local auto players such as Sime Darby, Bermaz Auto, UMW and Proton indicate that they will adhere with the government’s decision to temporarily discontinue production over the next two weeks,” it said in a note yesterday.

The research house said footfall at the showrooms has been declining in recent weeks as the number of Covid-19 cases spiked.

“We do not think the current low petrol pump prices and lower interest rates from financial institutions will be able to overcome the negative impact of the ‘movement control order’ on the domestic auto sector.”

It believes that the public will likely delay any purchases of large-ticket items such motor vehicles, and instead focus on essentials such as food and medication.

Should the Covid-19 situation not improve and the government decides to extend the movement control order period beyond two weeks, CGS-CIMB said this could significantly impact sales volume in 1H20.

Historically, the total industry volume (TIV) made up around 11,000 units per week or 2% of TIV. Therefore, it estimated a potential for a 22,000 unit or 4% year-onyear drop in 2020 TIV.

“We keep our earnings forecasts for now but wish to highlight key downside risks to 1H20 earnings arising from the Covid-19 outbreak and unfavourable forex movement following the depreciation of the ringgit against US dollar.”