• We maintain our OVERWEIGHT stance on the auto sector with a lower TIV projection of 500K units (previously 565K units) for 2020. We expect a stellar improvement in auto sector sales in 2H2020, driven by the exemption of sales tax effective from 15 June until 31 December 2020. We strongly believe that the temporary waiver of sales tax will spur buying interest on passenger vehicles, especially the national brands Proton and Perodua. We also gather that most businesses have already resumed operations after restrictions for most economic activities have been lifted.
• In July 2020, the auto sector recorded an improved TIV of 57.6K units (+29% MoM, +13% YoY), the highest in 14 months. We think that this was attributed to three key reasons: 1) the SST exemption from the Penjana stimulus package; 2) aggressive promotional campaigns by car companies; and 3) a longer working month of July.
• We note the following for major car marques in July’s sales figures:

1) Perodua registered sales volume of 23.2K units (+16% YoY). The Aruz SUV sold a total of 2.3K units for the month. Perodua guided that the launch of the unnamed Perodua D55L 5-seater SUV will be delayed till 2021. On a separate note, Perodua has ramped up its monthly production volume to about 25.0K/month to cater for the uptick in demand for its vehicles due to the exemption of the SST. We note that Perodua sold an average of 20.0K/month in 2019.

2) Proton delivered 13.2K units (+54% YoY), which was the highest monthly sales volume recorded in 8 years. A total of 3.2K units of the X70 were sold in July and the model continued to be the best-selling SUV in Malaysia with 7M2020 sales of 9.9K units. We expect the X70 and the Proton’s mainstay PIES models to continue selling well in 2H2020 as these entry-level models are even more affordably priced and offer value for money now with the price reductions postSST exemption

Proton’s market share stood tall at 23% in July, consolidating its position in the 2nd place with a YTD market share of 21.7% behind Perodua’s 41.9%.

3) Honda sold 6.0K units (-20% YoY), and its market share of the non-national marques is now 10.0% standing behind Toyota. Honda Malaysia has announced that the all-new 2020 Honda City is now open for bookings as it targets a 4Q2020 launch, although there is no indication yet on the pricing for the model. The 5th -generation Honda City will come in 4 variants with an option for hybrid.

4) Toyota sold a decent 7.4K units (+31% YoY) in July, its highest for the year, bringing its 7M20 sales to 25.6K. YTD, Toyota managed to clinch the top spot for market share under the non-national segment at 11.0%, marginally above Honda’s 10.0%. According to the UMWH Group, Toyota’s top three best-selling models for the month were the volumedriven Vios, Yaris and Hilux which comprised a combined 77% of its total sales in July.

5) Nissan continued to show a lacklustre performance in its sales volume in July, recording a total of 1.6K units (-23% YoY) despite the SST exemption. We strongly believe the ongoing weak performance was due to Nissan’s unattractive product line-up, uncompetitive pricing and a lack of new launches. We note that only 0.5K units of the Serena S-Hybrid were sold for the month. Tan Chong Motor Group has recently guided that the all-new Nissan Almera CKD will be launched in 2H2020 but has not provided indication on the pricing or tentative dates for the launch.

6) Mazda posted a sales volume of 1.2K units (+20% YoY) in July, its best sales performance in 15-months. We believe that the bulk of its sales was contributed by the CX-5 and CX-8 as these two models are the main beneficiaries of the 100% SST exemption, compared to its other CBU models. To further sweeten the deal, BAuto is extending its warranty and free service period to 6 years (from 5 years earlier).

The approval rate for loans to purchase passenger cars stood at 50.2% in June, a marginal decrease of 0.1% from May 2020 and was lower than the average of 61.4% in 2019.

Source: AmInvest Research - 25 Aug 2020