Nov 2018 Total Industry Sales Volume (TIV) inched up 2.1% mom to 48.3k units. Nonetheless, the monthly sales was slightly weaker yoy (-1.8%) due to the heavy year-end promotions done in early 2H17 to meet full year sales targets. Unlike last year, we believe most of the carmakers are already close to their 2018 year-end targets, hence implementing their usual year-end promotions only in Dec 18. All in, the 11M18 TIV stands at 550.5k units (+5.5% yoy), accounting for 92.7% of our full year forecasts. We raise our 2018 TIV forecast to 600k units (previous forecasts at 594k units) as we anticipate higher sales volume for Dec 18, driven by new model launches and the yearend promotional campaigns. Maintain OVERWEIGHT.

Perodua Leads; Proton’s All-new X70 Should Drive 2019 Sales Volume

Perodua sold 21.1k vehicles in Nov 2018 (+8.1% mom, +26.9% yoy); with 11M18 sales of 208.8k units (+13.1% yoy). As such, Perodua can certainly exceed its 2018 sales target of 209k units. Perodua remains as the market leader with an 11M18-market share of 37.9% (11M17 at 35.4%). On the other hand, Proton’s Nov18 sales volume was flat yoy (+0.2%), but contracted by 5.4% mom to 4.8k units, limited by a supply constraint

occurred in Nov 2018. With over 10k bookings for the all-new Proton X70 launched on Dec 12th 2018, coupled by the zero SST pricing policy and year end promotions, we think Proton sales volume will likely improve in the coming months.

Non-national Carmaker’s Market Share at 51.3%

The non-national carmakers dominates the Malaysian auto arena for the sixth month – 11M18-market share at 51.3%. Mazda continued to shine for the fifth consecutive month - achieving another strong monthly sale of 1.9k units in Nov 18 (only 59 units lesser from the tax holiday high in Aug 18). We believe Mazda’s sales momentum will remain healthy, considering the order backlog of ~3k units. Elsewhere, Toyota sales in Nov 18 was down to 3.9k units (-18.7% mom, -43.3% yoy) as consumers are looking forward to the all-new Camry and all-new Vios, which will be launched between 4Q18-1Q19, we believe. Meanwhile, the European carmaker’s 11M18 sales volume grew by 12.6% yoy to 24.4k units, led by higher sales volume from Mercedes-Benz (+10.2% yoy) and BMW (+15.1% yoy) respectively.

Maintain OVERWEIGHT

We maintain OVERWEIGHT on the sector, expecting sector earnings to remain healthy amidst top-line growth and sustained strength of the Ringgit. For sector picks, we prefer Toyota (UMWH MK), Mazda (BAUTO MK) and Perodua (UMWH MK/MBM MK).

Key risks

Downside risks could come from: i) a prolonged tightening of auto financing hindering the borrowing ability of car buyers; ii) exchange rate risk; and iii) a slowdown in the economy.

Source: Affin Hwang Research - 19 Dec 2018