August’s  auto  sales  slumped,  but  we  expect  them  to  bounce  back  in 4Q14,  helped  by  September’s  launches  of  two  all-new  models  from Proton  and  Perodua.  The  new  Proton  Compact  Car  and  Perodua  Axialook  like  they  will  be  very  competitive  within  their  own  market segments.  Unpredictable  consumer  behaviour  in  the  run  up  to  the implementation of GST is a key near-term risk. BUY Berjaya Auto, SELL Tan Chong. Our sector call remains NEUTRAL.

August  sales slump.  According to data from the Malaysian Automotive Association (MAA), auto sales for August  slumped 15.2% m-o-m to just 51,125 units (flat  y-o-y).  Cumulative  total  industry volume  (TIV)  for  the eight  months  to  August  reached  444,534  units,  up  2.7%  y-o-y.  Most distributors recorded  softer  vehicle  deliveries  during the month  and  we attribute this to the stronger vehicle sales in the months leading up to the Aidil  Fitri  holidays  in  late  July.  In  addition,  sales  of  both  national  car marques  were  unusually  weak  in  anticipation  of  the  lau nches  of  two important new models in September.

National  car  sales  slip  in  anticipation  of  new  models.  Proton  and Perodua’s  sales  for  August  declined  22.0%  and  23.8%  m-o-m respectively.  We believe this is due to the anticipated launch of the Bsegment  Proton  Compact  Car  (PCC)  scheduled  on  25  Sept.  The Perodua Axia  A-segment model was officially launched on 15 Sept,  with four  variants  priced  between  MYR24,600  and  MYR42,530.  We understand that  production of the  older  Perodua  Viva  has ceased,  with stocks exhausted as channel inventories are refreshed with the new Axiamodel. Initial media reports suggest that both the PCC and the Axia  look like they will be competitive in their respective segments. We understandPerodua  has  received  13,500  bookings  for  the  Axia  in  the  first  monthsince it began taking orders.  Deliveries of the new national car models should ramp higher in 4Q14 and make up for the transitional weakness.

Post  Raya  blues.  The  broader  market  saw  slightly  weaker  vehicle deliveries following the  Aidil Fitri  sales promotion frenzy.  Honda’s  sales were flat m-o-m while Toyota’s  sales eased 6.3%. Nissan’s   sales fared the worst amongst the Big Three (-17.7% m-o-m, -27.1% y-o-y and YTD -18.5% y-o-y)  as its  Almera  suffered  from  the  onslaught  of  newer  rival models. Mazda’s sales displayed steady improvement (YTD +14.1% y-oy).

A  resilient  4Q14  expected.  Although  we  expect  September  to  be another transitional month for both Proton and Perodua, the underlying demand remains firm. The main risk for national car sales is the rate of financing approvals. We reiterate our 2014 TIV forecast of 675,000 units considering the YTD sales and new model pipeline.

Source: RHB