- It was reported in local dailies this morning that two carmakers will unveil a reduction in prices. BMW Group Malaysia unveiled a CKD variant of its Mini Countryman, which will be the first locally assembled Mini variant in Southeast Asia. Pricing will be lowered by 30% by achieving a localisation rate of 40% (from 0% as currently Mini models are brought in as CBU), which allows it to lower duty cost significantly. The CKD Mini Countryman will be assembled at BMW’s assembly plant in Malaysia.

- Proton meanwhile, will unveil a 10% reduction in the price of an existing model tomorrow. Our channel checks recently suggest that Proton will be launching a basic variant of the Preve. Currently, the cheapest Preve is priced at RM59, 990 (manual transmission, normally aspirated 1.6 litre engine), while variants with auto transmission are priced at RM62, 990 and RM72, 990 - the latter, fitted with a turbocharged 1.6 litre engine.

- Assuming Proton introduces a basic Preve with an auto transmission (as the manual variant is a small seller with average monthly sales of just 58 units, or 9% of total Preve sales), we estimate pricing of the new variant to range between RM55K-60K. This price segment is currently dominated by Perodua MyVi’s higher end 1.5 litre variants, which generate volumes of circa 3,500/month, or 48% of total MyVi sales.

- MBM’s auto parts manufacturing unit, which has been hit badly by Proton’s 25% YoY production contraction should see a recovery from the launch of this variant. Proton is estimated to contribute c. 60% of MBM auto part unit’s revenue.

- While there would be concern on the impact on the Almera, we note that 94% of Almera sales comprise of higher variants priced between RM69,800 to RM79,800, while the Almera’s lowest end variant with manual transmission (priced at RM66,800) generates 6% of total Almera sales.

- We have factored in average monthly Almera sales of 2,000 units this year versus actual average monthly sales of 2,995 units of the Almera in 1Q13. As such, we make no changes to our projection for TCM from the launch of the cheaper Proton variant. More importantly, launch of new Nissan MPV models in early 3Q13 should provide another leg up for TCM’s sales volume and could entice further upgrades in our numbers. As it is, annualised YTD (April) Nissan TIV of 56,075 (without new MPV contribution) units already accounts for 94% of our FY13F Nissan TIV of c. 59K.

- TCM remains our high conviction sector pick (BUY, FV: RM7.50/share) followed by MBM (BUY, FV: RM4.50/share). The measures undertaken underpin our view that car price reduction will not be achieved via outright excise duty reduction but rather via higher localisation and introduction of new variants, which will have minimal impact on secondary market values of existing variants.

Source: AmeSecurities