January 2019 Total Industry Volume (TIV) rose by 8.7% yoy to 48.5k units (+0.5% mom) on improved consumer sentiment, promotions for the Chinese New Year festive celebrations and clearance of 2018 stocks. The recently launched sport-utility vehicles from Proton (X70) and Perodua (Aruz) have garnered considerable interest / bookings and will likely excite the car buyers for the remaining of the year. We maintain our OVERWEIGHT stance for the sector, top picks are UMW, Bermaz Auto and MBM Resources.

National Carmakers Rack Up Market Share Gains

Perodua registered higher sales of 20.1k units in Jan 2019 (+9.4% mom, +13.7% yoy), accounting for 41.5% of market share. With over 8k bookings for the all-new Aruz SUV and the popular demand for existing model lineups, we believe Perodua’s prospects remain bright for the next few quarters. Proton’s 1M19 sales volume climbed to 6.9k units (+22.6% mom, +43.5% yoy), netting in market share of 14.2% (a commendable improvement from 10.8% in 2018). The better sales performance was mainly driven by popular demand of the X70 that was launched on Dec 12, 2018. Bookings for the X70 has exceeded 15k units since the launch on Dec 12, 2018. Market share for the national carmakers of 55.7% outpaced the non-national carmakers in 1M19 for the first time since the tax holiday period in June 2018.

Non-nationals Took a Breather in 1M19

Most non-national carmakers saw a yoy decline in sales volume – Toyota at 3.2k units (-11.2% yoy), Honda at 7.5k units (-7.6% yoy), Nissan at 1.6k units (-20.6% yoy). On a brighter note, Mazda was the star performer in 1M19, clocking in 1.6k units (+23.5% yoy), thanks to the popular demand for the facelifted CX-3 and CX-5. We learnt that backlog for Mazda vehicles stood at 2.5k units as at end Feb 2019. Elsewhere, we expect Toyota’s new model line-up (Rush, Camry, Vios, Yaris) will reinvigorate sales volume moving forward. Similarly, the luxury car market sales volume also dipped in 1M19 – BMW/Mini at 0.9k units (-1.2% yoy) and Mercedes-Benz at 1.1k units (-12.7% yoy).

Maintain OVERWEIGHT, Top Picks / Key Risks

We maintain our OVERWEIGHT rating as we expect: (i) vehicle sales momentum to remain healthy; and (ii) strengthening of Ringgit to US$ and JPY to improve profit margins. Sector top picks include UMW (UMWH MK), Bermaz Auto (BAUTO MK) and MBM Resources (MBM MK). Downside risks could come from: i) a prolonged tightening of auto financing; ii) exchange rate risk; and iii) a slowdown in the economy.

Source: Affin Hwang Research - 22 Feb 2019