OSK Research is maintaining an 'underweight' call on the automotive sector on expectations that bottlenecks in Japan, will lead to a shortage of vehicles in Malaysia, despite buoyant demand in the past quarter.

In a note today, the research firm said auto companies'' earnings are likely to be hit in the second and third quarters, as poor economic efficiency and spiraling raw material prices pinch margins.

'We expect vehicle sales in the upcoming months to decline gradually and bottom out in August or September, as vendors and assemblers are starting to hint of depleting inventory,' it said.

Although, Perodua remains in the top spot, its volume continues to languish as potential buyers hold back on purchases, ahead of the impending launch of the new Myvi replacement slated for the second half of the year.

It said Proton gained traction on higher sales of the Saga, Exora and Persona, thanks to aggressive promotional hire purchase rates and vehicle exchange rebate programme.

'We would not be surprised if the national car maker climbs back to the number one spot in the next few months,' it added.

Non-national leaders Toyota, Nissan and Honda continued to see intense competition from the smaller players, notably Naza.

OSK said its mid cap 'buy' in the sector is Proton, as it expects its fourth quarter numbers to spring a positive surprise. -- Bernama