New car launches in March boosts auto rebound

KUALA LUMPUR: Sentiment has turned positive for the auto sector as total industry volume (TIV) reached 63,878 units in March, a 49 per cent month on month (m-o-m) increase

and a whopping 201 per cent year on year (y-o-y) increase, given a weak base in March last year, which was impacted by the implementation of the first movement control order (MCO).

Analysts with MIDF Amanah Investment Bank Bhd (MIDF Research) said the March TIV was driven by pre-Raya festive campaigns, a rush for deliveries to meet annual targets for companies with March financial year-end and strong demand underpinned by the tax holiday extension up till June 2021.

“Inventories are being replenished after a shortfall in January and February, while chip shortage issues could likely see gradual recovery towards mid-year,” it said in its analysis yesterday.

“We leave our 2021F TIV of 550,000 units unchanged at this juncture, which is conservative relative to the Malaysian Automotive Association’s eight per cent y-o-y and consensus’ nine to 13 per cent y-o-y range.”

Year-to-date, the research house saw that TIV was up by 33 per cent y-o-y to 139,499 units, the bulk of which was driven by the large increase in March against a weak base last yearm and accounting for 25 per cent of MIDF’s full year projections.

“We see scope for further upside to our numbers, notwithstanding potentially weaker sales in the immediate period post-expiry of the tax holiday in June 2021,” MIDF Research continued.

“Despite the temporary supply constraint, demand remains strong with one to three months’ worth of booking bank on average, backed by the extended tax holiday, while the stronger Ringgit further underpins the sector’s earnings recovery this year.”

Taking a detailed look at the passenger vehicles segment, researchers at Kenanga Investment Bank Bhd (Kenanga Research) saw a m-o-m increase of 52 per cent and a y-o-y increase by 203 per cent in March.

Specifically, Toyota’s sales mostly came from its top models namely all-new Toyota Vios, Yaris, and Toyota Hilux with overwhelming delivery of facelifted Vios and Yaris which were officially launched on 17th December 2020.

UMW introduced its all-new Toyota Corolla Cross on March 25, 2021 which has garnered positive response, which is a completely built up model from Thailand with local assembly expected to start in the second half of the year.

“Honda’s sales mostly came from Honda City, Civic and BRV with exceptional response for the all-new Honda City which was launched on October 13 last year,” it said in its own report.

“Nissan’s all-new Almera has started to propel positive growth for the brand, but overall growth still lags behind other marques from the dearth of all-new model launches.

“Mazda’s sales were mostly contributed by face-lifted CX-5 and all-new CX-8 with a recovery in February after the surprise termination of its attractive 6year/120,000-km warranty and free maintenance (including labour, parts and lubricants) package for new vehicles purchased (except the BT-50) hampered its January sales significantly.”

As for local marquees, Kenanga Research saw that Perodua’s sales was driven by the allnew Perodua Axia, Myvi, and Bezza, and boosted by ARUZ and Ativa (6,857 units sold at 28 per cent of sales) with the allnew Perodua Ativa recording 14,574 outstanding bookings until March 30 with 4,345 units delivered.

“The surge in sales in March was underpinned by strong demand, particularly for the Ativa, chalking up sales way ahead of its 3,000-unit monthly target,” it added.

“Proton was buoyed by the all-new X70 and X50 (5,750 units sold at 39 per cent of sales), with bulk of sales coming from X50 CKD (3,513 units, total 11,654 units delivered since launches) and further supported by the facelifted Proton Saga, Iriz, and Persona.”

Kenanga Research believe the new volume-driven launches could help spur sales along with overflowing backlogged bookings and further boosted by the extension of the Sales and Services Tax exemption to June 30, 2021, seasonal promotions and more new launches expected in the 2H of the year.

“Overall, 2021 could potentially be a better year with incentives program under NAP 2020, positive impact from Bank Negara Malaysia’s overnight policy rate (OPR) cut and pre-emptive measures that soften the Covid-19 impact.

“We maintain our overweight call on the auto sector with 2021 TIV target of 585,000 units.”