Vehicle sales expected to soften in second half

End of sales tax, higher interest rates may dampen market

“We think that the sector’s valuation reflects the mixed growth prospects in 2022.” CGS-CIMB Research

PETALING JAYA: Vehicle sales are expected to soften in the second half of 2022 (2H22), in view of the expiry of the sales and service tax (SST) holiday at the end of next month.

CGS-CIMB Research in a report said the government’s plans to introduce targeted fuel subsidies and higher interest rate environment will also dampen sentiment in the automotive sector in the second half. The research house is maintaining its full-year total industry volume (TIV) forecast of 580,000 units, despite the strong projected vehicle sales growth in the first half.

“Year-to-date April 2022 TIV comprised 37.2% of our full-year projection of 580,000 units (14% higher year-on-year). We expect sales momentum to continue in the second quarter, given the robust backlog orders.”

CGS-CIMB Research is maintaining its “neutral” rating on the automotive industry and expects the sector to register stronger year-onyear revenue growth in the second quarter, driven by higher TIV delivery.

However, it said earnings performance could be partially offset by higher operating expenses, in view of the depreciating ringgit against the dollar. The automotive sector trades at 14.2 times the 2022 estimated price-to-earnings (P/E), in line with CGS-CIMB Research’s target sector P/E of 14 times.

“We think that the sector’s valuation reflects the mixed growth prospects in 2022. We prefer Bermaz Auto Bhd given the addition of the Kia and Peugeot marques to its stable,” said the research house.

CGS-CIMB Research noted that TIV fell 23.2% month-on-month (m-o-m) to 56,213 units in April, due to lower sales of both passenger vehicle and commercial vehicle segments which fell by 24% and 13% m-o-m, respectively.

The Malaysian Automotive Association attributed the weaker m-o-m TIV in April to shortages of semiconductor chips and components, coupled with shipment delays.

MAA expects sales volume in May 2022 to stay relatively flat m-o-m, due to the shorter working month following the Hari Raya holidays and ongoing supply chain disruptions continuing to affect several automakers.

In April, TIV grew 8% year-on-year to 215,965 units, driven by higher sales from the non-national segment (+26.9% year-on-year), led by Japanese marques Honda, Toyota and Mazda.

However, this was partially offset by a decline in sales volume of national brands like Proton, which fell by 27.8% year-on-year due to chip and component shortages.

Meanwhile, market leader Perodua still managed to deliver healthy 11.5% year-on-year sales volume growth in the first four months of 2022, despite the plant shutdown and vendor supply issues in the first quarter.

Hence, the national segment’s market share fell by 6.5% points year-on-year from 62.7% in the first four months of 2021 to 56.1% in the first four months of 2022.

Meanwhile, Toyota retained its position as the leading non-national brand with 13.5% market share in April. This was despite the strong resurgence from Honda, which registered 33% sales volume growth last month.