According to data from the Malaysian Automotive Association (“MAA”), the total industry volume in July rebounded by 15% YoY and 28% MoM to 68,431 units. As expected, the revival of new vehicle purchase momentum was on the back of the easing expectations of lower car prices post the GE13 and aggressive marketing campaigns during the preHari Raya festive season. On YTD basis, the 7MCY13 TIV growth widened to 6% (from 4% in YTD June) YoY to 381,919 units at 60% of both our and the MAA 2013 forecasts of 641,560 and 640,000 units respectively, thus in line with expectations. For August, we are of the view that TIV should continue to trend higher with the positive spillover effect from the festive season sales campaign and the easing expectations of lower car prices by the consumers. On the rife comments by Netizens that local banks had received a memo from the central bank to cut the financing period and increase initial payment for new cars to curb the country's household indebtedness, BNM’s governor Dr Zeti Akhtar Aziz has clarified that the central bank has no such directive, but stressed that it is up to the bank to exercise such an option. On our take, while we downplay such a move by majority of the banks judging from slightly moderating household debt after new measures were implemented back in July, we are of the view that should such measure be implemented, it will dampen the recovering auto sales momentum and the impact will last for at least six months taking cues from the sales pattern during tighter loans requirement back in the 1H12. Putting that aside, we are maintaining our NEUTRAL rating on the sector and retaining our 2013 TIV forecast of 641,560 units (+2.2% YoY).

Sales rebounded strongly YoY and MoM. The total industry volume in July rebounded by 15% YoY and 28% MoM to 68,431 units. As expected, the revival of new vehicle purchase momentum was on the back of the easing expectations of lower car prices post the GE13 and aggressive marketing campaigns by industry players during pre-Hari Raya festive season. The 7MCY13 TIV growth widened to 6% (from 4% in YTD June) YoY to 381,919 units at 60% of both our and the MAA 2013 forecasts of 641,560 and 640,000 units respectively, thus in line with expectations.

National marques improved by leaps and bounds. Perodua sales surged by 22% MoM and 13% YoY to 19,152 units, reflective of the overwhelming response of the S-series variants of its existing Viva, Alza and Myvi models in conjunction with the pre-Hari Raya festive seasons. Similarly, Proton sales also saw a robust growth of 54% MoM and 30% YoY amidst the successful launching of Proton Saga SV (c.13% or RM5000 cheaper than the FLX Standard 1.3, the previous entry-level Saga). Positively, this launching has also successfully arrested the declining trend, closing the YTD negative gap from previous 11% to 5%.

Honda and Nissan outstripped the market with robust YTD growth. On the non-national marques front, Honda and Nissan continued to outperform the auto market sales with YTD sales growth recorded at 83% and 81% respectively. On a closer look at Honda, its outperformance was due to the low base effect in 2012 coupled with the overwhelming sales for its Honda’s fourth generation CR-V. Meanwhile, robust Nissan sales were boosted by the new launching of Serena S-Hybrid as well as the preference of Almera in the B-segment, grabbing share from the Toyota (-16% YTD) on its transitions over the new Vios.

Outlook. We are of the view that TIV should continue to trend higher in August with the positive spillover effect seen during to the festive season sales campaign as well as the easing expectations of lower car prices by the consumers. On the rife comments by Netizens that local banks had received a memo from the central bank to cut the financing period and increase initial payment for new cars to curb the country's household indebtedness, BNM’s governor Dr Zeti Akhtar Aziz has clarified that the central bank has no such directive, but stressed that its up to the bank to exercise such an option. On our take, while we downplay such a move by most of the banks judging from slightly moderating household debt after new measures were implemented back in July, we are of the view that should such measure be implemented, it will dampen the recovering auto sales momentum and the impact will last for at least six months taking cues from the sales pattern during tighter loans requirement back in the 1H12. Putting that aside, we are maintaining our NEUTRAL rating on the sector and retaining our 2013 TIV forecast of 641,560 units (+2.2% YoY).

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 (July) growth of 6% YoY as we anticipate a lower 2H13 YoY growth due to the normalization of base effect.

Source: Kenanga