According to data from the Malaysian Automotive Association (“MAA”), the total industry volume (“TIV”) in June dropped 5% YoY but  rebounded 8% MoM to 53,631 units. As expected, the YoY drop was mainly due to the ongoing wait-and-see attitude adopted by some of the consumers on expectations of lower car prices after the general election, although we reckon the effect is gradually moderating. Meanwhile, the MoM gain was generally on account of aggressive sales campaigns by industry players targeting pre-Hari Raya festive season. YTD 6MCY13 TIV remained in positive territory (+4% YoY), making up 49% of both ours and the MAA 2013 forecasts of 641,560 and 640,000 units respectively. YTD total industry production (“TIP”) inched up by 4% to 293,511 units. We believe that the TIV will trend higher in July and August amid the pre-Hari Raya sales coupled with the launching of new models. We are maintaining our NEUTRAL rating on the sector and retaining our 2013 TIV forecast of 641,560 units (+2.2% YoY) despite the decent YTD (June) growth of 4% YoY as we anticipate a lower 2H2013 YoY growth due to the normalization of base effect. 

Sales dropped YoY but rebounded MoM. The total industry volume in June registered a drop of 5% YoY but rebounded by 8% MoM to 53,631 units. Delving deeper, the drop on YoY basis was mainly due to the ongoing wait-and-see attitude adopted by some of the consumers on expectations of lower car prices after the general election, although we reckon the effect is gradually moderating. Meanwhile, on MoM basis, the gain was generally due to the aggressive sales campaign by industry players amidst pre-Hari Raya festive season. On YTD basis, the 6MCY13 TIV growth grew by 4% YoY to 313,488 units, making up 49% of both ours and the MAA 2013 forecasts of 641,560 and 640,000 units, respectively.

Production marginally higher YoY and MoM. June’s total industry production merely inched up by 1% YoY to 49,432 as the decent production volume (+2% YoY) in passenger vehicles was offset by a lower production volume (-8% YoY) in commercial vehicles. Meanwhile on MoM basis, the TIP increased by 5% on the back of higher production volumes in both passenger vehicles (+3% MoM) and commercial vehicles (+17% MoM). YTD, the TIP registered a growth of 4% to 293,511 units.   

Sales analysis.  On YoY basis, the main marques, except for Honda and Nissan, recorded a decrease in passenger vehicle sales in June. Note that for the non-national marques, Honda and Nissan, their sales jumped 19% and 48% to 3,232 and 3,392 respectively on the base effect coupled with the overwhelming sales of the Honda’s fourth generation CR-V and Nissan’s Almera. Meanwhile on the national marques, both Proton and Perodua registered weaker sales of 10,803 units (-20%) and 15,757 (-4%) units respectively. On MoM basis, sales were generally higher for the main auto companies with the exception of Perodua and Honda. Perodua registered lower sales growth of 6% to 15,757 vehicle units while Honda sales decreased by 5% to 3,232 units. On YTD basis, passenger vehicle sales still remained in the positive territory with YTD sales of 275,991 units (+4% YoY). This was on the back of better sales at Nissan (+79%) and Honda (>100%) which we believe to be mainly due to the low base effect in 1H2012 (supply chain disruptions caused by the Thailand flood). Meanwhile on the commercial vehicles segment, sales declined by 3% on YoY basis with Isuzu and Hino being the main outperformers with total sales of 998 units and 620 units, an improvement of 19% YoY and 14% YoY respectively. MoM sales improved by 2% led by better sales in Isuzu (29%) and Mitsubishi (15%). On YTD basis,  commercial vehicle sales also remained in positive territory with YTD sales of 37,497 units (+6% YoY).

Outlook. We concurred with the MAA’s view that TIV should continue to trend marginally higher in July due to the festive season sales campaign. Meanwhile on the upcoming revised National Automotive Policy (NAP), we believe that it will focus mainly on positioning the country as a regional hub for hybrid vehicles and energy-efficient vehicles (EEV), and thus, should be positive for  all the auto players, especially DRB-Hicom (MP, TP: RM2.81) and UMW Holdings (MP, TP: RM14.07) as both will benefit from their partnerships and affiliations with foreign car makers, which can be developed into further tie-ups and collaborations.

Neutral on the sector. We are maintaining our NEUTRAL rating on the sector and retaining our 2013 TIV forecast of 641,560 units (+2.2% YoY) despite the decent YTD (May) growth of 4% YoY as we anticipate a lower 2H2013 YoY growth due to the normalization of base effect.

Source: Kenanga