The Feb-20 total industry volume (TIV) rose by 6% yoy to 40k units, driven by stronger sales performance from the national car brands: Perodua (+10% yoy) and Proton (+89% yoy). Monthly sales dipped by 4% mom due to a decline in Honda’s sales volume (-71% mom). We expect the Mar20 sales volume to be severely affected due to the temporary suspension of operations. In our view, Malaysians will also hold back on big-ticket items such as cars if the Covid-19 pandemic is prolonged. We recently cut our 2020 TIV assumption to 562k units (-7% yoy, previous forecast: 583k units) in our strategy report. Maintain Neutral.

Both National Carmakers Continued to Perform Well

Proton remained the champion for Feb20 – car sales volume rose by 89% yoy to 10k units (+17% mom), thanks to higher demand for the updated Saga, Exora, Persona as well as the CKD X70 models. Proton’s stellar February performance saw its 2M20 market share rise to 22.4%, its highest since 10M13 at 22.5%. Perodua’s Feb20 sales volume was also commendable at 18.9k units (+10% yoy; +8% mom), led by healthy demand for its existing Perodua line-up, maintaining its dominant position with a 44.1% market share (2M19: 44.1%). The national carmakers’ combined 2M20 market share soared to all-time high of 66.6% (2M19: 58.4%).

Another Weaker Month for Non-national Cars

Meanwhile, the Japanese brands’ 2M20 sales volume declined by 27% yoy: Honda (-42% yoy), Nissan (-40% yoy), Mazda (-4% yoy) and Toyota (-2% yoy). Notably, Honda’s Feb20 sales volume plunged by 71% yoy and mom to 1.8k units, its lowest monthly sales volume since Mar12. Honda Malaysia had to rely on a limited number of 2019 cars as its 2020 models were affected by the revised excise duty regulation. The higher Honda prices may see Malaysians shifting their attention to other Japanese brands, potentially affecting the top non-national brand’s 2M20 market share of 9.4% (2M19:15.9%). We are unable to ascertain the sales performance for BMW/Mini, Mercedes-Benz and Scania as these carmakers would only disclose their sales volumes on a quarterly basis moving forward.

Maintain NEUTRAL

We maintain our NEUTRAL rating on the auto sector. For sector exposure, Sime Darby (HOLD) is our preferred pick as we think there could be earnings upside potential given likely stronger industrial contribution from its Australasia mining equipment exposure.

Source: Affin Hwang Research - 25 Mar 2020