Worst is here as only 141 cars sold in April
KUALA LUMPUR: Analysts are reiterating their negative calls on the automotive sector as it only registered sales of 141 units in the month of April.
According to the figures from Malaysian Automotive Association, total industry volume (TIV) for April 2020 of 141 units was a drop of 99.7 per cent month on month (m-o-m) and 100 per cent year on year (y-o-y).
Researchers with Kenanga Investment Bank Bhd (Kenanga Research) said the units registered were only a statistic from JPJ e-Da ar system, with no actual delivery as all the marques’ showrooms, vehicle productions and deliveries were temporarily closed, halted and delayed for the period of March 18 till May 12, 2020, with some showrooms only gradually reopening starting May 4, 2020.
“Note that the official document from JPJ can only be retrieved starting May 13, 2020 for vehicles collection,” they said yesterday.
“The registrations that were carried out were for vehicle purchases in which car loans had already been approved prior to the movement control order (MCO) along with an issued Le er of Undertaking (LoU), and the completion of the registration was so there would be no lapse in the agreement, which would entail going through the whole process again.
“However, the registered vehicles would not have physical documentation or road tax, and with no PDI and facilities closed, buyers would have had no avenue to collect the vehicles, rendering them mere statistics in the system.”
Looking in May, Kenanga Research expect car sales volume for May 2020 to be significantly higher than April with the reopening of business, but still lower than traditional monthly registrations prior to MCO, with long queues at Puspakom, JPJ, cautious consumer spending, and stringent loan approval.
“Despite the federal government allowing most of the economic sectors to reopen on May 4, 2020, including showrooms, the MCO is still in effect with revised conditional measures which, together with nine states still maintaining strict MCOs, will continue to restrict consumer spending appetite on high value items, in our view,” it continued.
“We maintain out underweight call on the sector with 2020 TIV target units of 420,000 units. We believe that national marques would fare worse than nonnational marques with target markets of lower to mid-income range being the most financially distressed segment.
“Furthermore, planned new launches for the second half of 2020 could be delayed given the weak consumer sentiment, but some reliefs could arise from be er incentives program under NAP 2020, and positive impact from BNM’s overnight policy rate cut and pre-emptive measures to assist those who might be financially challenged by Covid-19 impact.”
This sentiment was shared by MIDF Amanah Investment Bank Bhd (MIDF Research), who said that a recovery post-MCO is likely to be pushed out given the implication on job security, wage outlook and consumer sentiment.
“consumers would have likely shi ed into ‘survival mode’ now with li le priority for discretionary spend,” it said in a separate report. “Players such as Tan Chong had reportedly implemented salary cuts for employees and fee reduction for independent directors in response to the slowdown in sales.
“The absence of support schemes such as scrapping program during 2008/2009 financial crisis, underpins our more bearish expectations relative to the 2009 downcycle.
“We remain negative on autos. The sector is likely to be dominated by negative newsflows and datasets in the near-term. Earnings pressure is compounded by a weak ringgit and potential discounting post-MCO.
“Nonetheless, balance sheets are currently solid with players under coverage a aining either net cash positions or manageable net gearing of below 40 per cent.”