• Former president and chief executive officer (CEO) of Perodua Datuk Dr Aminar Rashid gave a talk on Malaysia’s automotive industry at AmInvestment Bank on 15 Jan 2020.

• The key takeaways from the presentation are as follows:

1) Aminar highlighted that Thailand is the “Detroit of Asia”, where it currently has the largest automotive industry in Southeast Asia with vehicle exports of more than 50% of its total industry production (TIP), accounting for about 879 billion baht in 2018. This was due to the Thai government introducing various tax incentives and exemptions to attract foreign direct investments (FDIs). He also said that Indonesia is an up-and-coming giant with strong potential growth for passenger cars which will compete against Thailand for the pole position in the region.

2) According to Aminar, Malaysia’s TIV growth will be marginal year-on-year should there be no major catalyst for the automobile sector. This is in view the fact that Malaysia is already tipping towards the saturation point of around 600–610K units per annum.

3) Malaysia has the potential to export more automotive parts and components. Meanwhile, there are still barriers which will limit the export of vehicles. The Malaysia Automotive, Robotics & IoT Institute (MARii) has forecasted the parts and components export to be worth RM61.3 billion by 2050, which entails 15.0% of our national GDP.

4) Electric and autonomous vehicles are undoubtedly the future but there are several major problems – higher cost of ownership and maintenance, and the difficulty in disposing of batteries and vehicles. Malaysia’s receptiveness to electric vehicles is relatively low, and currently, there is no ecosystem to support the growth of such vehicles (e.g. lack of plug-in charging stations, scarcity of auto parts).

5) Mobility-as-a-Service (MaaS) to be a paradigm shift in the transport space. MaaS is envisioned to be carried out via an integrated system with the rise of micro mobility and shared mobility. This will help to bridge the first mile/last mile gap, thus saving time and money.

6) There will be a new emerging trend which converts vehicles from a product to a service. We are witnessing the entry of motorcycle e-hailing services GrabBike, DEGO ride and GoJek into Malaysia after their success in Thailand, Vietnam and Indonesia. The Ministry of Transport has approved a 6-month trial period for the Klang Valley area beginning January 2020.

• We maintain NEUTRAL on the auto sector with a TIV projection of 610K units for 2020. Our top picks for the sector are DRB-Hicom (FV: RM3.18) and MBM Resources (FV: RM5.54).

Source: AmInvest Research - 21 Jan 2020