March 2019 Total Industry Volume (TIV) of 54.8k units (+9.6% yoy; +37.5% mom) was the highest monthly sales volume recorded since the tax holiday period between June to August 2018. 1Q19 TIV of 143k units was firm, up 6% yoy and we think 2Q19 TIV should be stronger, in view of the attractive new model line-ups and upcoming Raya promotions which may entice Malaysians to upgrade their cars for ‘balik kampung’. As such, 1Q19 TIV is within expectations, accounting for 23.7% of full year forecast. Maintain OVERWEIGHT.

SUVs Elevate National Carmakers 3M19 Sales Volume

Proton’s Mar 19 car sales chalked up 6.1k units (+46.0% yoy, +16.1% mom); 3M19-market share rose to 12.8% (3M18 at 9.5%), driven by the overwhelming response for the Proton’s flagship SUV, X70 (49% of Proton Mar 19 sales volume; received 25k pre-orders since launch on Dec 2018). The hype on the X70 as well as the recently-facelifted Iriz and Persona will likely boost Proton’s sales volume moving forward. Meanwhile, Perodua also registered an impressive Mar 19 sales volume of 23.3k units (+12.3% yoy, +35.0% mom), securing 42.4% of total industry market share (3M18: 41.1%). We expect Perodua’s strong sales momentum to sustain in 2019, spurred by deliveries of the new Perodua Aruz (delivered ~4k units from 14k Units Booking) as Well as Popular Demand for Other Models.

Japanese Cars Ex Toyota Take a Breather

Growth in the national carmaker’s sales volume saw the non-national carmaker’s 3M19-market share dropped to 44.8% (3M18: 49.4%). In Mar 19, Toyota stood out as the winner amongst the Japanese brands – clocking in sales volume of 5.9k units (+13.7% yoy; +26.1% mom), owing to the popular demand for Toyota’s new models, namely Vios, Rush and Camry. Besides these models, Toyota recently launched its new Yaris (OTR, without insurance price between RM70.8k-83.9k), which we think is not competitive vs its closest peer, Honda Jazz (OTR price: RM70.2k- 82.6k). Elsewhere, we think Mazda sales will remain sturdy for the next quarter, considering its healthy backlogged orders of 1.5k units. As for the European brands, we think BMW’s upcoming aggressive product pipeline may steal some buyers from Mercedes-Benz in 2019 - BMW’s 3M19 TIV grew by 4.7% yoy to 2.9k units whereas Mercedes-Benz saw a 11.1% yoy decline to 3k units in 3M19 TIV.

Maintain OVERWEIGHT, Top Picks/ Key Risks

We maintain our sector OVERWEIGHT rating; sector picks include Bermaz Auto (BAUTO MK) and MBM Resources (MBM MK). 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 - 22 Apr 2019