Auto sales in February were soft as expected due to festive holidayswhich translated into a shorter working month. Auto sales contracted 0.4% MoM and 0.6% YoY, while cumulative YTD sales were flat. We believe the tepid sales were also a function of consumers holding back purchases ahead of the GST implementation against a backdrop of generally weaker consumer sentiment. Berjaya Auto is our Top Pick.

Seasonal factors in play. Sluggish sales were expected for February on account of a shorter working month due to the Lunar New Year. According to the Malaysian Automotive Association (MAA), sales fell 0.4% MoM and 0.6% YoY to reach 50,390 units in February, while YTD total industry volume (TIV) was flat at 100,992 units (2014: 100,991 units). We believe this was also due to a combination of subdued consumer sentiment and the lingering confusion about how the goods and services tax (GST) – which will be implemented this April – would affect car prices, as the new 6% GST will replace the 10% sales tax.

• Stellar showing from Mazda. As deliveries of the new Mazda 2 gather pace, Mazda sales rose 13.6% MoM as it continues to lead gains among non-national marques with its cumulative YTD increase of 39.6% YoY. After suffering from a low order bank in January, Toyota sales were up 25.6% MoM but down 34.7% YoY. YTD Toyota sales slumped 36.5% YoY to just 9,268 units, the worst performance among all major marques. Nissan sales in February fell 25.3% MoM, which we believe was likely attributed to the end of discounting for the pre-facelift models to clear stocks following the introduction of the facelifted Almera in Jan 2015. YTD, non-national passenger vehicle sales were down 10.6% YoY, reflecting consumer hesitation to commit to big-ticket consumer discretionary items.
• Perodua up, Proton down. Perodua sales rebounded 15.7% MoM as popular models such as Axia and the recently-launched facelifted Myvi continue to steal market share from its competitors. Cumulative Perodua sales advanced 25.1% YoY, lifting market share to 34.3% YTD from 31.8% last month. On the other hand, Proton sales were down 7.3% MoM in Feb, despite the discounts of up to MYR7,989 being offered for the 2014 Iriz models.
• Outlook. With the GST implementation on the horizon, we expect to see weaker auto sales in March as vehicle shoppers hold back purchases until the impact of the GST on vehicle prices becomes clearer.

Source: RHB Research - 25 Mar 2015