March auto sales rebounded ahead of the implementation of the GST on 1 Apr, rising 33.6% MoM and 32.7% YoY to 67,314 units and bringing1Q15 sales to 168,306 units (+5.3% YoY). Both national and nonnational marques recorded higher sales that we believe were attributed to aggressive pre-GST sales campaigns and a longer working month. We are NEUTRAL on the sector. Berjaya Auto remains our Top Pick.

• Hits 19-month high. Mar 2015 marked the highest monthly sales recorded in the last 19 months. According to the Malaysian Automotive Association (MAA), sales during the month rose 33.6% and 32.7% MoM and YoY respectively to 67,314 units. 1Q15 sales rose 5.3% YoY to 168,306 units. We believe that the jump in sales is mainly attributable to promotions given by car companies to run down their sales and service tax (SST)-paid stock ahead of the goods and services tax (GST) implementation.
• Honda continues to lead the pack. Honda and Mazda recorded the highest MoM improvement. Honda sales grew 58.6% MoM and 94.9% YoY to 9,581 units, its highest monthly sales total on record, likely due to the introduction of the new HR-V, boosting its already strong product line-up. The roll out of the new Mazda 2 helped to boost Mazda sales by51.2% MoM and 63.7% YoY. Toyota sales were somewhat tepid in March, given the sales rush recorded by its peers, growing 42.2% MoM but down 27% YoY. However, its YTD sales slumped 32.6% YoY, with 16,603 units registered. After Honda pipped Toyota for the crown for the highest non-national passenger vehicles sold in 2014, Honda is now also the leader for non-national total vehicle (passenger and commercial) sales in 1Q15. After the slump in February, Nissan sales recovered 41.9% MoM and 25.5% YoY, recording YTD sales of 13,314 units.
• National car market share dips. Proton recorded sales of 10,528 units in March, up 27.6% MoM but down 14.5% YoY. Proton sales were helped by discounts of up to MYR7,988 being offered. Meanwhile, Perodua registered a monthly sales record of 22,497 units, up 21.0% MoM and 37.8% YoY, bringing 1Q15 sales to 57,153 units (+29.8% YoY). The robust annual jump in Perodua sales helped the market share of national cars to recover to 50.4% in 1Q15 from 46.1% in 4Q14.
• Outlook. We expect to see auto sales soften in 2Q15. In the immediate aftermath of GST having generally raised living costs for the most part, we believe the psyche of the consumer for big ticket purchases could be affected in the short term. While auto sales should gradually recover in 2H15, the automotive market will most likely remain highly competitive and challenging – especially for distributors with a weak product pipeline or line-up. NEUTRAL.