Auto sector’s stronger November 2016 sales in line with expectations
KUCHING: The automotive sector’s stronger November 2016 sales were in line with expectations, given the wide range of models launched in the previous months as well as the aggressive sales campaigning by auto players during the year- end period.
Kenanga Investment Bank Bhd’s research arm ( Kenanga Research) said, based on the Malaysian Automotive Assciation’s ( MAA) press release, the production and sales for November 2016 revealed that November’s sales volume of 49,085 was 12.45 per cent lower than November 2015.
MAA also noted that total industry volume ( TIV) of 515,293 for year to date ( YTD) November 2016 was 13.7 per cent lower than the similar corresponding period in 2015.
According to Kenanga Research, the year on year ( y- o-y) weakness in the Passenger segment (down 12 per cent) demonstrated the continued pressure felt by consumers in relation to tighter lending requirements and higher living expenses, as compared to 2015, which appeared to have affected Toyota (down 33 per cent y- o-y) and Nissan (down 25 per cent y- o-y) the most.
The research arm has however noted that Toyota demonstrated the strongest month on month (mo-m) gain (up 26 per cent), possibly led by the face-lifted Toyota Vios, their most affordable offering, which entered the market in late- October.
It noted that Nissan also registered strong m- o-m growth (up 23 per cent).
However, Kenanga Research saw this as a normalisation of demand for the brand as Nissan usually registers monthly sales of circa 2,400 units but was underpinned in October by model launches by competitors during that month.
“On the underperformers in m- o-m sales terms, Mazda declined the most, by 23 per cent, likely the result of slower vehicle delivery from the temporary closure of a contractor’s assembly plant, in addition to their low base, which extended its y- o-y weakness (down 36 per cent),” the research arm said in a sector update.
With the automotive sector’s YTD first 11 months of 2016 (11M16) TIV of 515,293 comprising 90 per cent of the research arm’s 570,000 unit forecast for 2016, Kenanga Research made no changes to its year- end forecast as it believed its target is achievable with more robust sales expected in December.
“In addition, there may be some preemptive buying in lieu of the intended price increase for selected models of certain brands, such as Mazda and Perodua,” it said.
“This may dampen sales for these brands in the early months of 2017 until consumers are able to adjust to the new prices.”
However, the research arm believed the impact will be neutral to TIV numbers as this may result in a transfer of market share between brands given the wide offerings available to cater to the different consumer segments.
Looking forward into 2017, Kenanga Research maintained its estimates of 610,000 units with a limited growth of seven per cent y- o-y.
This was in line with the research arm’s conservative view with consumer purchases for automobiles being clamped by stringent lending guidelines as well as prevailing weakness in sentiment resulting from higher living expenses.
“In addition, automakers have been experiencing a pinch in their profit margins with operating costs being pressurised by unfavorable forex.
“Furthermore, there is a lack of re-rating catalysts to bring about any significant shift in the sector,” it said.
That being said, Kenanga Research noted that TIV sales numbers going forward are likely to be driven by the models launched in the second half of 2016 (2H16), such as the Perodua Bezza, the Proton Saga, the new Proton Persona and Ertiga, the new Honda Civic and the face-lifted Toyota Vios with the new Innova.
It further noted that forthcoming model launches are the new Honda BRV, the face-lifted City, Jazz and face-lifted Camry.
All in, Kenanga Research maintained its ‘underweight’ rating on the automotive sector given the outweighing of ‘ underperform’ ratings in the total market capitalisation of the research arm’s stock coverage coupled with the lack of re-rating catalyst for 2017 as well as rising costs and poor consumer spending.