RHB projects automotive TIV to soften to 600,000 units in 2023

KUALA LUMPUR (Dec 28): Total industry volume (TIV) for the automotive sector is expected to soften to 600,000 units in 2023 from the forecast of 700,000 units in 2022 due to slower economic growth, according to RHB Investment Bank Bhd.

The firm said the 600,000-unit forecast takes into account the anticipated strong volume in the first quarter of 2023 (1Q2023) as automotive companies rush to deliver orders exempted from the sales and service tax (SST) before the end of March 2023.

The Malaysian Automotive Association's (MAA) forecast for 2023 TIV is more bullish at 636,000 units, which is slightly more than its projection of 630,000 units for 2022. Based on the first 11 months of 2022, TIV has hit 642,000 units, exceeding the MAA's projection but yet to exceed RHB's 700,000-unit projection.

“The estimated 14% year-on-year decline is premised on slower economic growth in 2023 and the absence of a SST exemption,” RHB’s analyst Jim Lim Khai Xhiang said in a note on Wednesday (Dec 28).

Nonetheless, he also said automotive orders have been gradually recovering month-on-month after the SST exemption period ended on June 30, 2022 as consumers adapt to the SST-inclusive prices.

“We see this as an encouraging sign and expect new model launches and facelifts in 2023 to continue fuelling new orders. However, we continue to anticipate slower economic growth and possible excise duty reforms as potential dampeners to auto demand,” Lim said.

Lim is of the view that the electric vehicle (EV) segment will continue to be a bright and exciting space as more EV offerings are expected locally in 2023.

These included BMW’s all-electric i7 and i5 EVs and XM plug-in hybrid, Bermaz Auto Bhd’s Peugeot e-2008 and Kia's PBV1 EVs, UMW Toyota Motor Sdn Bhd’s first battery EV bZ4X and Great Wall Motors’ Ora Good Cat.

He said BYD by Sime Darby Motors has raked in thousands of orders for its Atto 3 launched on Dec 8, 2022.

RHB’s top auto stock picks are Bermaz and Sime Darby Bhd as these companies have the widest EV selections, which put them in a good position to capture the growing EV adoption locally and regionally.

Lim has a target price of RM2.55 for Bermaz and RM2.80 for Sime Darby.

But he cautioned that both Bermaz and Sime Darby are experiencing some form of supply shortages while most domestic players are able to secure the semiconductors and components needed.

He said any remaining supply chain bottlenecks should gradually lessen with China’s continued easing of Covid-19 restrictions. He has maintained a “neutral” call on the sector over concerns of a slower 2023 beyond the strong deliveries in the near term.

At Wednesday's noon break, Bermaz shares settled at RM2.10, which translates to a market capitalisation of RM2.44 billion. At a share price of RM2.20, Sime Darby's market capitalisation was RM14.99 billion.