Auto sector to see stiffer competition in B-segment car passenger space
KUCHING: The automobile sector is expected to see stiffer competition in the B-segment passenger car space this year while non-national sport utility vehicles (SUVs) will likely remain uncompetitive in 2020.
According to AmInvestment Bank Bhd (AmInvestment Bank), other than the occasional festive and year-end promotions, the automobile sector still lacks major organic growth catalysts after the Goods and Services Tax (GST) exemption period in 2018.
“Going into the first half of 2020 (1H20), we expect competition to intensify in the B-segment passenger car division as there will be several new launches which include the all-new Honda City completely knocked down (CKD), all-new Honda Jazz CKD and the all-new Nissan Almera CKD,” the research firm said.
“As these models are expected to enter the local auto market within a short period of time, they will provide consumers with wider options, thus likely to slow down the demand for Toyota passenger cars such as the Yaris and Vios which were launched in 2019.
“This could lead to the possibility of UMW Toyota dishing out price discounts to hold up sales volume thus affecting profitability margins for its automotive segment.”
As for non-national SUVs, AmInvestment Bank projected that this segment will remain uncompetitive in 2020.
The research firm expected an influx of a few key SUVs in 2020, namely the Nissan Kicks, Mazda CX-3 completely built up (CBU), Proton X70 CKD, Proton X50 CKD and the Honda CR-V.
“We anticipate the national SUVs to be priced more attractively compared to the nonnational SUVs.
“Out of all the aforementioned models, the Proton X70 and X50 are well-equipped with level 2 automation, have more competitive pricings and better infotainment systems for a better driving experience.
“With that, we believe that the non-nationals are likely to lose more market share to national marques in 2020 due to their lack of features and unappealing pricing.”
With consumer sentiment remaining weak as evidenced by the Malaysian Institute of Economic Research’s (MIER) Consumer Sentiment Index which remained low, AmInvestment Bank believed that the market for vehicles in the premium segment will continue to be soft in 2020.
In the research firm’s coverage universe, the strongest impact will be on Bermaz Auto Bhd due to the group’s pricier SUVs.
“Going forward, we believe that there is a need for the group to focus more on its export business via its 30 per cent-owned MMSB, exporting to neighbouring countries under two flagship products, the CX-5 and CX-8.”
AmInvestment Bank also highlighted on the upcoming National Automotive Policy (NAP) 2019, which is expected to further push for initiatives to make Malaysia a regional hub for energy-efficient vehicles (EEVs).
“This direction could potentially see further excise duties exemptions or customized incentives be accorded to carmakers that comply with EEV standards.
“If this materialises, we believe that it will benefit Perodua which has the highest concentration of EEV-certified models.
“This change could improve its product pricing competitiveness and expand its sales volume.”
Hence, the research firm continued to like MBM Resources Bhd and UMW Holdings Bhd which hold strategic stakes in Perodua.
“Besides Perodua, various models from other marques such the Mazda CX-5, Mazda CX-8, Toyota Vios, Honda City, Jazz and the Civic, the Proton X70 and the upcoming Proton X50, which comply with EEV standards, may also stand to benefit from any change in duties or incentives.”
On the overnight policy rate (OPR), AmInvestment Bank’s house view holds that there could be another OPR cut to 2.75 per cent in the first quarter of 2020 (1Q20).
The research firm strongly believed that the 25 basis points (bps) cut in interest rates is not expected to significantly impact the automobile sector or sales of vehicles.
“In the purchase of big-ticket items such as cars, any reduction in interest rates is not likely to ease consumers’ burden in monthly loan repayments.”“