KUALA LUMPUR (Dec 18): Kenanga Research has downgraded the automotive sector to “neutral” and projected industry-wide sales volume, also known as total industry volume (TIV), to contract by 8% to 710,000 units in CY2024 as fuel subsidy rationalisation is seen to hurt the demand for mid-market models.

In a sector update on Monday, the research house, however, said it remains optimistic on vehicle sales in the affordable segment, with buyers, especially from the B40 group, spared the impact of subsidy rationalisation, and also potentially benefitting from the introduction of the progressive wage model.

“Our sector top pick is MBM Resources Bhd (outperform; target price: RM5.50), which is a good proxy to the affordable and fuel-efficient Perodua vehicle brand.

“It also offers an attractive dividend yield of about 11%,” it said.

Kenanga said in the space of local brands, both Perodua and Proton models have been selling well, being competitively priced against non-national brands while offering improved technological and safety features.

“Perodua is ahead in the new model race (in term of volume) with the launch of the all-new Perodua Axia (improved features such as digital speedometer and emergency braking assistance) followed by two more face-lifted models this year, and one new model in early 2024 (Perodua D66B, B-segment).

“On the other hand, Proton recently launched the first mild-hybrid electric vehicle (MHEV) for the local brand, its all-new Proton X90, and its first sedan under Geely partnership, all-new Proton S70 (C-segment sedan at the price of non-nationals B-segment), Proton-SMART (BEV), and five face-lifted models, all within CY23,” it said.

Additionally, Kenanga said vehicle sales will be supported by new battery electric vehicles (BEVs) that enjoy SST exemption and other EV incentives up to CY2025 for complete built-up units and CY2027 for complete knocked-down units.

“BEVs’ new registration had leapt significantly for the past two years (from 274 units in CY21 to over 3,400 units in CY22 and 9,000 units by Nov 2023) and is on track to meet national target for EVs and hybrid vehicles which are 15% of total industry volume (TIV) by CY30, and 38% of TIV by CY40.

“Meanwhile, the government’s pledge to enable charge point operators (CPOs) to secure faster approvals for installation provide comfort as currently only 1,434 EV charging stations have been built to-date,” it said.