Overweight on auto sector with higher 2022 TIV target
KUCHING: Analysts have maintained ‘overweight’ on the automotive sector with a higher 2022 total industry volume (TIV) target of 680,000 units and 2023 TIV target of 690,000 units.
To recap, the October 2022 TIV came in above the research arm of Kenanga Investment Bank Bhd’s (Kenanga Research) expectation at 89 per cent of its full-year forecast as the delivery of selected models (Perodua and Toyota) picked up momentum on the easing of parts shortages.
“Nonetheless, the production of most other models remained sub-optimum as the shortages of chips and components persisted on continued disruptions to the supply chain due to intermittent lockdowns in China,” Kenanga Research gathered.
“Having said that, the October 2022 TIV already surpassed that of October 2019 (pre-pandemic) by 13 per cent.”
As such, Kenanga Research raised its current year 2022 (CY22) TIV assumption by five per cent to 680,000 units (up 34 per cent) from 650,000 units, and CY23 TIV assumption similarly by five per cent to 690,000 units (up two per cent) from 660,000 units.
Both of the research arm’s targets were still above the Malaysian Automotive Association’s (MAA) target of 630,000 units (up 24 per cent) and 636,000 units (up one per cent), respectively.
“The last highest TIV was recorded in 2015 at 666,674 units prior to the introduction of goods and services tax (GST).”
Kenanga Research’s revision was premised on faster delivery of backlog orders with the easing of parts supply shortage for certain models (i.e. Perodua and Toyota).
“To ensure consumers keep coming back to their showrooms, automakers are putting onto the market newer models that also command better margins.
“Currently, vehicles order backlogs are reaching the tune of some 350,000 units.”
According to the research arm, not all of these, particularly new models with a waiting period of beyond 12 months (such as Perodua Alza), will be delivered and registered before end-March 2023 to enjoy the Sales and Service Tax (SST) exemption (despite the bookings being made prior to end-June 2022).
“This means TIV will not fall off the cliff after March 2023. Additionally, there will be launches of new battery electric vehicles (BEVs) that will still enjoy SST exemption and other EV facilities incentives up to 2024 for CBU and 2025 for CKD, underpinning the TIV.”