According to the Malaysian Automotive Association (MAA), TIV for April 2021 registered 57,912 units (-9% MoM, >100% YoY). The YoY superb growth was due to last year MCO 1.0 when all almost businesses were closed. Whilst, MoM lower sales was due to enforcement of CMCO in several states and global chip shortage which has impacted sales of some makes. We expect May sales to trend lower than April sales with the implementation of the MCO 3.0 reducing traffic flows into showrooms, shorter working month due to Hari Raya festive holidays, and global chip shortage which will continue to affect sales of some makes up to September 2021. Maintain OVERWEIGHT with 2021 TIV target of 585k units (+11% YoY) and 3% ahead of MAA’s target of 570k units. We expect a hiccup in sales of the older models from the global chip shortage (i.e. Perodua Myvi), to be offset by sufficient supply of newer models which garner better margins. We believe the new volume-driven launches could help spur sales along with the overflowing back-logged bookings and further boosted by the extension of SST exemption to 30 June 2021, seasonal promotions and more new launches in the 2H of the year. Our sector pick is MBMR (OP; TP: RM4.90) as a pure proxy to the largest national Perodua dealership and deep value in its 22.58% stake in Perodua.

TIV for April 2021 registered 57,912 units (-9% MoM, >100% YoY). YoY superb growth was due to last year MCO 1.0 when almost all businesses were closed. Whilst, MoM lower sales was due to enforcement of CMCO in Selangor, Kuala Lumpur, Johor, Penang, Kelantan and Sarawak and global chip shortage which has impacted sales of some makes. We expect May sales to trend lower than April sales with the implementation of the MCO 3.0 reducing traffic flows into showrooms, shorter working month due to Hari Raya festive holidays, and global chip shortage which will continue to affect sales of some makes up to September 2021.

Taking a detailed look at the passenger vehicles segment (-9% MoM, >100% YoY) revealed that the -9% MoM unit sales contraction was primarily due to sharp dips in Perodua’s and Honda’s unit sales. Among outperformers. Mazda’s (+32% MoM, >100% YoY) sales were mostly contributed by face-lifted CX-5 and all-new CX-8 with a recovery starting February after the surprise termination of its attractive promotional campaign hampered its January sales significantly. Toyota’s (+28% MoM, >100% YoY) sales mostly came from its top models namely all-new Toyota Vios, Yaris, and Toyota Hilux with overwhelming delivery of face-lifted Vios and Yaris. UMW introduced the all-new Toyota Corolla Cross, on 25 March 2021 to positive response, which is a CBU model from Thailand with local assembly expected to start in the second half of the year. Nissan’s (+10% MoM, >100% YoY) all-new Almera has started to propel positive growth for the brand, but overall growth still lags behind other marques from the dearth of all-new model launches. Proton (-1% MoM, >100% YoY) was buoyed by the all-new X70 and X50 (5,557 units sold at 38% of sales), with bulk of sales coming from X50 CKD (3,583 units, total 15,237 units delivered since launches) and further supported by the face-lifted Persona, Iriz, Exora and Saga (collective known as PIES). Perodua (-17% MoM, >100% YoY) was driven by the all-new Axia, Myvi, and Bezza, and boosted by ARUZ and Ativa (6,266 units sold at 31% of sales) with the all-new Ativa recording 4,624 units delivered (up to 9k units delivered since launches) way ahead of its 3,000-unit monthly target. The global chip shortage has only affected its older models especially Myvi while the newer models’ inventory is sufficient up to six months. Honda’s (-40% MoM, >100% YoY) sales mostly came from City, Civic and BR-V with exceptional response for the all-new City. The global chip shortage has affected its older models while the newer models’ inventory is sufficient up to six months.

Maintain OVERWEIGHT with 2021 TIV target of 585k units (+11% YoY). We expect the current hiccup in sales of the older models from the global chip shortage (i.e. Perodua Myvi), to be offset by sufficient supply for the newer models which garner better margins. We believe the new volume-driven launches (i.e. Perodua Ativa, Proton X50, Honda City and Nissan Almera) could help spur sales along with overflowing back-logged bookings and further boosted by the extension of SST exemption to 30th June 2021, seasonal promotions and more new launches expected in the 2H of the year. Overall, 2021 could potentially be a better year with NAP 2020 incentives program, positive impact from BNM’s OPR cut and pre-emptive measures that soften the Covid-19 impact. Our economics research team have the view that an expected global growth recovery and the impact of the large fiscal stimulus on domestic economy would result in a projected GDP growth rebound of 6%-6.5% in 2021 (BNM: 6.0% - 7.5%; 2020: -5.6%)

Source: Kenanga Research - 27 May 2021