According to the Malaysian Automotive Association (MAA), TIV for July 2020 registered sales of 57,552 units (+29% MoM, +13% YoY), which reflected full-month of SST exemption sales which started mid-June, which will last up to December 2020. Both Toyota and Honda showed super-normal MoM growth for July 2020 with their production plants fully operational this month, while Proton continued to drive highest YoY growth with its all-new X70 CKD (3,087 units sold in July at 23% of sales). Sales volume for August 2020 is expected to be maintained around July level with continuation of SST exemption sales and on-going promotional campaign. 7MCY20 reported TIV of 232,111 units (-33%), forming 55% of our previous sales target of 420k. From the recent news-flow, we believe that more new volume-driven launches are coming (i.e Proton X50, Honda City and Nissan Almera) compared to just one that is expected to be delayed (i.e Perodua D55L). Thus, we upgrade our sales forecast to 475k unit from the 420k units estimated previously. We keep our sector and stock calls pending upcoming earnings reports.

July 2020 registered sales of 57,552 units (+29% MoM, +13% YoY), which reflected fullmonth of SST exemption sales which started mid-June, which will last up to December 2020. Sales volume for August 2020 is expected to be maintained around July level with continuation of SST exemption sales and on-going promotional campaign. The quantum of vehicles price reduction under sales tax exemption are as follow:- (i) Perodua average price lower by 3%-6%, (ii) Proton average price lower by 1%-6%, (iii) Honda average price lower by 3%-5%, (iv) Toyota average price lower by 1%-5%, (v) Mazda average price lower by 2%-4%, and (vi) Nissan average price lower by 1%-6%.

Taking a detailed look at the passenger vehicles segment (+27% MoM, +13% YoY), both MoM and YoY performances tracked the overall unit sales trend on the above-mentioned reasons. Both Toyota and Honda showed super-normal MoM growth for July 2020 with their production plant fully operational this month. Toyota’s (+80% MoM, +37% YoY) sales growth was contributed by the all-new Toyota Vios, Yaris, and Hilux, which comprised 77% of UMW Toyota’s sales. Note that, UMW Toyota SB announced that orders are being taken for the upcoming facelifted Toyota Hilux with new improvement cosmetically as well as safety and performance. For Honda (+81% MoM, -20% YoY) sales mostly came from its top models Honda City, Civic and BR-V. Note that, Honda is already attracting the spotlight with the 2020 Honda BR-V with over 1,400 bookings received in the first month (85% for range-topping V variant) and planning to unveil the all-new Honda City soon. For YoY, the highest growth came from Proton (+37% MoM, +54% YoY) was boosted by the all-new X70 CKD (3,087 units sold at 23% of sales), and supported by the face-lifted Proton Saga, Iriz, and Persona. Note that, Proton plan to unveil the all-new Proton X50 soon. Mazda (+20 MoM, +20% YoY), showed increased delivery for face-lifted CX-5 and all-new CX8. Perodua (+9% MoM, +16% YoY) was driven by the all-new Perodua Axia, Myvi, and Bezza, and supported by ARUZ (2,305 units sold at 10% of sales). Note that, Perodua has reached its growth limit producing up to 25k unit/month or 98%/99% of its plant capacity from July 2020, which will be maintained until all back-orders are fulfilled; consequently, push the launching of Perodua D55L to next year. On the other hand, Nissan (+41% MoM, -26% YoY) fared the worst due to dearth of all-new model launches. Note that, Nissan plan to unveil the all-new Nissan Almera soon, but could prove untimely with the launch of popular Honda City.

We maintain UNDERWEIGHT on the sector with a higher 2020 TIV target units of 475k (-21% YoY), from 420k previously. From the recent news-flow, we believe that more new volume-driven launches are coming (i.e Proton X50, Honda City and Nissan Almera) compared to just one that is expected to be delayed (i.e Perodua D55L). Thus, we upgrade our sales forecast to 475k units from the 420k units estimated previously. Note that, MAA envisaged TIV forecast for 2020 at 470k units (-22% YoY). We believe that sales tax exemption until end-of the year may help spur sales, along with better incentives program under NAP 2020, positive impact from BNM’s overnight policy rate (OPR) cut and pre-emptive measures to assist those who might be financially challenged by Covid-19 impact. Nevertheless, we remain concerned with the economic impact from the pandemic with our economic research team having the view that 2020 GDP is expected to contract by 5.9%.

Source: Kenanga Research - 25 Aug 2020