- The Malaysian government announced a 20sen hike in petrol (RON95) price and diesel price effective midnight yesterday. New prices of RON95 petrol and diesel will be at RM2.10/litre and RM2.00/litre respectively.
- While we acknowledge that this hike is a fairly large quantum, an analysis on historical fuel price suggests that TIV is not particularly sensitive to fuel price hikes.
- In fact, there is no concrete proof of any inverse trend between fuel price increases and TIV growth (See Chart 1). While an initial knee-jerk reaction can sometimes be expected in the immediate month, we do not expect a structural impact on longer term car sales.
- Historical data suggests that only 5 out of 11 cases (or 45%) of petrol price hikes in the past resulted in a TIV contraction in the immediate month. In fact, the only incident that resulted in a double-digit contraction occurred in Feb 06 when fuel price was hiked by 30sen/litre.
- On the contrary, during the period of June 2008 to Dec 2008, TIV saw a MoM contraction of 3%-26% despite a collective 90sen/litre decline in retail fuel prices.
- On our estimates, an average passenger car owner (excluding commercial vehicles) consumes ~150 litres of petrol per month, which translates into spending of RM285/month. At an increase of 20sen per litre, spending on petrol would increase by RM30 to RM315/month.
- The net increase of RM30/month (or RM360/annum) is equivalent to ~1.1% of GDP per capita, which in our view, is too marginal to have a drastic impact on a car buyer’s purchasing decision.
- Our TIV projection remained unchanged at 637,000 units for 2013. Key sector catalysts are:- (1) Gradual price reduction from cheaper parts and tax incentives; (2) Initiatives to drive exports which could be unveiled in the upcoming NAP review; (3) In the mid-term, gradual enforcement of End-of-Life Vehicle policy.
- We retain our OVERWEIGHT rating on the auto sector and maintain our BUY calls on Tan Chong (FV: RM7.50/share) and MBM (FV: RM4.60/share).
Source: AmeSecurities
Chart | Stock Name | Last | Change | Volume |
---|
Created by kiasutrader | Dec 08, 2015
Created by kiasutrader | Dec 07, 2015
Created by kiasutrader | Dec 04, 2015
Created by kiasutrader | Dec 03, 2015