• Dec-20 Total Industry Volume (TIV) rose 25.5% yoy to 68.8k units (+19.5% mom) – recording its highest monthly volume since Dec 2015.
• 2020 TIV of 529.4k units (-12.4% yoy) was above expectations broadly on higher sales across most major marques.
• While we project 2021’s TIV to rebound c.9.5% to 580k, this remains below that of 2019 levels in view of car sales brought forward in 2020 and a prolonged challenging macro backdrop. Maintain sector NEUTRAL rating.

Highest Monthly TIV Since December 2015

Both the national and major non-national marques (i.e. Toyota, Honda, Mazda) posted strong double-digit yoy growths for Dec 2020, broadly underpinned by a confluence of factors: i) initial expectations of Dec 2020 being the final month of sales tax exemption, ii) new model launches, iii) on-going promotional campaigns and iv) lower financing costs. Consequently, Dec 2020 TIV soared to 68.8k (+25.5% yoy) – the second highest monthly volume in history (Dec 2015 hit a record high of 69.4k), bringing total 2020 TIV to 529.4k (-12.4% yoy). Amongst the notable outperformers for December were: Perodua (+37% on sturdy sales for its best-selling Myvi, Axia & Bezza models), Honda (+60% propelled by the launch of the new Honda City) and Mazda (+87% partly off a low base due to delays in car pricing approvals).

Proton and Mazda Registered Higher Volume for 2020

Notwithstanding a pandemic-hit 2020, Proton registered 108.5k (+8.3% yoy) volume sales for 2020 underpinned by volume growth in Persona, Iriz, Exora and Saga and supplemented by the newly launched X50. Meanwhile, Mazda recorded 12.1k (+4.2% yoy), partly coming off a low base in 2019 due to delays in car pricing approvals. All in, the national carmakers had a relatively decent 2020, as overall market share rose to 62% (vs 2019: 56%).

Sales Tax Exemption Set to Further Lift 2021 TIV

Looking ahead, with the sales tax exemption in place until June 2021, we foresee car sales growth to remain well supported. Subsequent to a better-than-expected 2020 TIV, we project 2021 to grow c.9.5% to 580k (MAA’s forecast: 570k), from 540k earlier, mainly as we raise Perodua and Toyota (incorporated in our UMWH note) volume sales to 230k and 65k respectively. That said, our 2021 projections remain below that of 2019 levels of 602.9k units, in consideration of: i) high element of car sales brought forward in 2020, ii) strict lockdown measures and iii) frail macro backdrop likely to affect big-ticket item sales.

Maintain NEUTRAL

We remain Neutral on the sector with MBM Resources as our relative preference in the sector, riding on 22.6%-owned Perodua’s leadership and having a strong balance sheet (net cash of RM160m; or RM0.40 sen/share) to withstand any potential downturn. Up/downside risks could come from: i) loosening/tightening of auto financing for car buyers; ii) fluctuation of RM vs US$/JPY; and iii) a greater-thanexpected pick-up/slowdown in the economy.

Source: Affin Hwang Research - 27 Jan 2021