October auto sales rebounded  +13.4% MoM  to 54,187  units from a  6.6% MoM  contraction  in  September  as  deliveries  of  the  Perodua  Axia gathered  pace. However, cumulative 10M14 TIV sales  continued to slow to +0.6% YoY from a higher base, in addition to consumers’ anticipation of year-end discounts  and some choosing to defer their purchases until the GST impact on car prices becomes clearer. Maintain NEUTRAL. 

Auto sales rebound.  According to  data from the Malaysian Automotive Association  (MAA),  uto  sales  rebounded  13.4%  MoM  to  54,187  units, against a 6.6% MoM  contraction  last month. The jump  in auto sales was expected  as deliveries  of  the  Perodua  Axia, which  was  launched on 15 Sep  gathered  pace.  Despite  the  MoM  gain,  auto  sales  for  the  month declined  1.6%  YoY,  while  cumulative 10M14  total industry volume (TIV) remained  flattish  at  +0.6%  YoY  with  YTD  sales  of  546,492  units.  We believe  the  sluggish sales could be due to consumers taking a wait-andsee approach ahead of the implementation of the goods and services tax (GST)  next  April,  where  a  6%  GST  will  replace  a  10%  sales  tax.  In addition, consumers could be putting off purchases to avail themselves of year-end discounts as automakers seek to clear inventories.

Perodua steals the show while Proton lags. Perodua and Proton sales rose  46%  and  1%  MoM  respectively.  We  believe  the  higher  Perodua sales were  due to ramped-up deliveries of  the new  Axia  model  after itslaunch.  Perodua looks  to be on track to meet its sales target of 193,000 units  this year.  We understand that  Proton has  been  slow  in  ramping  up production of the new  Iriz  in a  concerted effort to avoid  quality  issues  ofthe  past.  We  expect  Proton  sales  to  edge  up  further  in  the  coming months,  though  its  increasingly  dated  model  line-up  could  continue  to weigh on sales.    

Nissan  boosted  by  the  new  complete-knock-down  (CKD)  Serena. Honda,  Toyota  and  Nissan  all  posted  sales  gains  during  the  month, though  Nissan  sales  rose  15.7%  MoM,  boosted  by  sales  of  the  new Nissan  Serena  S-Hybrid.  Mazda  sales  remained  flat,  down  1.9%  MoMalthough cumulative Mazda sales were up 20.8% YoY. We expect Mazda sales to  improve  next  year following the launch of the highly-anticipated Mazda 2  and  Mazda 3 CKD  in Jan 2015. Cumulative Toyota sales  rose 14.4% YoY and Toyota is on track to meet its 2014 sales target. 

Outlook.  The  MAA expects November  sales  volume to be sustained at October’s  level,  ahead  of  the  GST  implementation  while  an  elevatedfinancing  rejection  rate  continues  to  crimp  vehicle  sales.  However, aggressive discounting  and sales promotions in the run-up to the yearend  could  boost  sales.  Our  current  2014  TIV  forecast  of  675,000  units can still be met if the industry has a strong close for the year.

Source: RHB