Auto  sales  were  relatively  lacklustre  in  November,  up  just  2.0%  MoM while  cumulative  YTD  sales  were  flat at 1.1%  YoY.  We believe that  the slower sales were due to  a combination  of  weaker consumer sentiment and  buyers  holding  back  purchases  in  anticipation  of  year-end bargains, impending new model launches  and GST implementation. We reiterate our NEUTRAL call on the sector. Our Top Pick is Berjaya Auto. 

Lacklustre  sales  in  November.  According  to  data  from  Malaysia Automotive Association  (MAA), auto sales in November  reached 55,293 units, up  2.0%  MoM and 5.8% YoY, while 11M14  total industry volume (TIV)  sales remained flat at 1.1%  YoY, with YTD sales of 601,785 units. We expected tepid MoM sales, with seasonal factors coming into play as vehicle  shoppers  hold  back  purchases  in  anticipation  of  year-end discounts  from automakers  while others prefer to register their vehicles in a new year.  The implementation of the goods and services tax (GST)next April,  which will see a 6% GST replacing the current 10% sales tax has  also  given  rise  to  consumers  putting  off  their  purchases  until  the impact of GST on vehicle prices becomes more apparent.  

Perodua Axia boost sales. Perodua sales rose 4.8% MoM while Proton sales slowed to 0.9% MoM. Higher Perodua sales were  expected as the carmaker  ramped  up deliveries of  the new  Axia  model. Meanwhile ,  we understand  production  of  the  new  Proton  Iriz  has  been  slow  in  a deliberate effort  to  avoid the  quality  control  issues  it experienced in the past. We expect Proton sales to climb further in the coming months   as deliveries of the new Iriz  gather pace,  although its relatively dated model range could dampen volume growth.

Steady gains for  Big Three non-nationals.  Toyota, Nissan and Honda all  reported  steady  gains  of  5.4%,  2.8%  and  1.5%  MoM  respectively. Mazda’s sales dropped 20.9% MoM but  cumulative  sales  surged  23.4% YoY. Mazda’s  MoM decline  could be due  to the temporary shutdown of its  production line  for upgrading  works. We expect an upswing in Mazda sales next year with the highly-anticipated launches  of  the  Mazda 2  and Mazda 3 completely knocked down (CKD) models in Jan 2015. 

Outlook.  We  expect  2014  TIV  to  only  reach  655,000-660,000  units, slightly short of our earlier forecast of 675,000 units. However, we expect vehicle  sales  to  remain  resilient  in  2015,  underpinned  by  a  strong product  pipeline  and  a  competitive  market  where  automakers  are prepared  to  offer  discounts. We  forecast  2015  TIV  to  ease  to  650,000 units.  We  expect  MBM  Resources  to  be  a  beneficiary  of  the  positive market response to the  Axia, while  Berjaya Auto’s Mazda marque may continue to make strong market share gains.

Source: RHB