The  seasonal  rebound  in  sales  was  expected,  driven  by  festive promotions  and  strong  demand  ahead  of  the  Aidil  Fitri  holidays.  We expect  sales  volume  in  the  coming  months  to  remain  buoyant,  helped by  value-for-money  offerings  from  Proton  and  Perodua  in  addition  to important new model launches from the “Big 3” non-national  marques. Top picks are Tan Chong and DRB-HICOM. Maintain NEUTRAL.

- All  time  high.  The  sales  data  in  July  was  the  highest  monthly  sales volume  achieved  by  the  market,  reaching  68,431  units  (+27.6%  m-o-m; +15.1% y-o-y). This comfortably beat the previous monthly high of 63,349 units  achieved  in  March  2011,  according  to  data  from  the  Malaysian Automotive  Association  (MAA).  The  cumulative  total  industry  volume (TIV) was up 5.9% y-o-y to 381,919 units and is the second consecutive monthly gain. A strong sales month had been expected, given attractive promotional offers and the seasonally stronger demand ahead of the Aidil Fitri  holidays.  We  believe  there  was  also  some  element  of  pent-up demand,  given  that  some  buyers  had  held  back  on  their  purchase decisions in the preceding quarter owing to the General Election and talk of lower car prices. With the shorter working month in Aug, auto sales will likely moderate.

- Saga  SV  boost  for  Proton.  Proton  sales  reached  their  second  highest ever monthly total of 16,629 units (+53.9% q-o-q; +29.6% y-o-y), bettered only  by  the  17,505  units  sold  in  March  2011.  The  strong  sales  were sparked  by  overwhelming  demand  for  the  Proton  Saga  SV,  which  we understand  has  already  garnered  over  24,000  orders.  While  we  were concerned that Perodua could be affected, it too posted a strong month, with  sales  up  21.5%  m-o-m  and  12.6%  y-o-y  to  19,152  units  on  strong demand for the Perodua S-Series models. Continued strong demand for these value-for-money models from the national car manufacturers could significantly  lift  industry  TIV.  The  market  share  for  national  cars  spiked higher to 52.3% in July, up from 49.5% in June and 50.2% last July.

- Honda stages biggest rebound. Honda walked away with the prize for the strongest m-o-m rebound in the non-national category, with sales up 86.8%  to  6,038  units.  This  was  likely  due  to  the  launch  of  the  locally assembled Jazz, Honda’s cheapest model at MYR74,800. Nissan had a good month while Toyota also clawed back lost ground. 

- Outlook. July TIV is likely to have been the peak sales month for 2013, but  it  is  a  good  start  and  in  line  with  our  base  case  expectations  for stronger  auto  sales  in  2HCY13.  We  are  relieved  that  Bank  Negara  has officially  refuted  market  rumours  of  a  clamp  down  in  auto  financing. However, currency trends are going against the sector, with auto stocks likely to remain out of favour until portfolio flows stabilise.

Source: RHB