May 2022 TIV slowed down -11.8% MoM to 49.6k units, due to a shorter working month from the Raya festive season. Nevertheless, TIV still registered a growth of +5.1% YoY and +7.4% YTD (to 265.7k units), mainly due to low base effect. We maintain our 2022 TIV expectation at 600k units (+17.9% YoY), as we expect sustained sales volume till year end, as SST exemption is still applicable for the current high order backlogs of 267k units so long these vehicles are delivered (and registered) by 31 Mar 2023. We reaffirm our NEUTRAL call on the automotive sector with top picks: DRB (BUY; RM2.00), MBMR (BUY; TP: RM5.00) and BAuto (BUY; TP: RM1.95).

Malaysian Automotive Association (MAA) reported TIV for May 2022 at 49.6k units, falling -11.8% MoM which was affected by shorter working month (due to Raya festive period and scheduled maintenance) as well as on-going supply chain disruption (including chip shortage). Nevertheless, TIV still reported a growth of +5.1% YoY and +7.4% YTD (to 265.7k units), affected by low base effect with a somewhat improved chip shortage situation. We are maintaining our TIV expectation of 600k units for 2022, a growth of +17.9% YoY, as we expect continued high order deliveries in coming months, backed by the large order backlogs for key OEMs i.e. Proton, Perodua, Honda, Toyota, etc. While SST exemption will end on 30 Jun 2022, Ministry of Finance (MOF) will allow the SST exemption to be applied for any vehicle booked within the period ending 30 Jun 2002 and registered before 31 Mar 2023. It was revealed there are over 264k units of undelivered bookings so far and we expect the order backlogs to spike further as consumers rush to make last minute bookings.

Despite the expected sustained TIV recovery until year end (backed by the high order backlogs), we still maintain our NEUTRAL rating on the sector, as we expect TIV to slowdown in 2023. We advise investors to accumulate MBMR (BUY; TP: RM5.00) and DRB (BUY; TP: RM2.00), as we expect national OEMs to triumph over the longer term with potential growth from new export markets. We also like BAuto (BUY; TP: RM1.95) for its strong balance sheet with high order backlogs lasting for more than 6 months.

For the period of April-May 2022, there was no data available for BMW, Mini, Mercedes, Peugeot and Kia.

Perodua (UMW and MBMR) recorded a sales of 18.9k units in May, a drop of -26.3% MoM due to the Raya festive season and scheduled maintenance. However, it was still a growth of +5.2% YoY and +10.3% YTD (106.2k units), reflecting improved supply chain situation YoY. The new Alza replacement model is now open for booking with starting price of RM69k. Management has also guided for two updated models in later part of the year.

Proton (DRB) maintained its second spot in May with 9.3k units, a growth +10.7% despite the shorter working month, reflecting the improved supply chain situation. Sales also improved by +5.8% YoY. YTD, sales was 43.3k units, a drop of -22.6% YoY, attributed to significant impact of supply chain in previous months. Including export volume of 2.1k units, total Proton sales was 45.4k units, which is relatively behind its 2022 sales target of 136- 150k units (indicating a growth of +18.6%-30.8% YoY). Proton has recently launched Saga MC2 facelift model and X70 MC facelift model with locally assembled 1.5L turbo engine.

Toyota (UMW) maintained its top position within foreign segment with 7.4k units (-0.7% YoY; +8.4% MoM) in May 2022. Toyota seems to be in better position in securing its supply of semi-conductor components. YTD sales was 36.6k units, +8.8% YoY, slightly outperformed the market +7.4% YTD. We understand that Toyota has outstanding orders lasting for 4-5 months. Toyota is relatively ahead of its sales target of 73k units for 2022. Upcoming exciting new launch would be a new EV model (likely by year end).

Honda (DRB) recorded May sales at 5.5k units (+7.6% YoY; -8.8% MoM), affected by supply chain woes (resulting to inconsistent production output at its Melaka Pant). YTD sales was 32.0k units (+28.1% YoY), behind Toyota. Honda is targeting sales of 80k units for 2022, which will enable the marque to potentially reclaim back its top position within the foreign segment. Honda is expected to launch the new HR-V model soon with pricing at RM120-140k, followed by the new BR-V model in coming months.

Mazda (BAuto) sales slowed down in May with 1.3k units (-4.1% YoY; -28.6% MoM), mainly affected shorter working days from the Raya festive season. YTD sales was up by +25.1% YoY to 6.7k units, similar to Nissan’s volume. Mazda has recently revealed the pricing of pick-up BT-50 model ranging RM93-144k. We expect Mazda to launch new MX- 30 EV, CX-30 CKD and CX-8 facelift in coming months.

Nissan (TCM) sales was 1.4k units (-2.3% YoY; -9.9% MoM) in May, increased YTD to 6.7k units (+17.3% YoY). The sales remained relatively weak as Nissan maintained its strategy to avoid stiff market competition, while leveraging onto its core models: Almera, Serena and Navara. Nissan has recently launched the Serena facelift with price ranging RM150-165k.

Source: Hong Leong Investment Bank Research - 22 Jun 2022