TIV Up 10% in October

According to the Malaysian Automotive Association (MAA), the monthly Total Industry Volume (TIV) increased 9.9% MoM in October, boosted by the passenger vehicles segment and contributed mostly by the national marques. We believe the growth may also be supported by a low base effect in September as consumers adopted a wait and see attitude before the announcement of the National Budget 2024 (which was tabled on 13th Oct). A total of 67.5k units of passenger vehicles were sold in October, which marked the second highest monthly TIV for 2023. While for the commercial segment, it increased by 12.5% MoM to 7.4k units. YTD, the TIV surged 11.7% YoY to 646.8k units, driven by both passenger and commercial car segments, which recorded total sales of 580.4k units (+12.8% YoY) and 66.4k units (+3.1% YoY), respectively (refer to Figure 1).

National Marques Registered Stronger TIV

Both national marques posted stronger TIV in October. Perodua’s sales volume increased 16.7% MoM to 33.8k units, which marked the highest ever sales performance for Perodua in a single month. Meanwhile, Perodua has also revised its 2023 sales volume target to 325k units from 314k previously. Proton, on the other hand, also achieved higher sales volume of 12.2k units in October (+1.5% MoM). YTD, both national brands, Perodua and Proton, registered higher sales of 20.2% and 14.8% YoY to 267.1k units and 127.0k units, respectively. The combined market share of national cars increased to 67.9% for 10M 2023 compared to 64.7% recorded last year.

Higher TIV for Non-National Marques Too

Meanwhile, for non-national marques, all major brands also registered higher TIV in October. Volkswagen registered the highest growth rate of 46.6%, followed by Mazda (+26.4%), Toyota (+21.4%), Nissan (+16.3%) and Honda (+12.3%). YTD, the combined sales of non-national cars increased by 2.6% YoY to 186.4k units, thanks to higher vehicle volumes registered by Toyota (+11.7% YoY) and Mazda (+38.9%), which offset lower sales volume from other marques (dropped in the range of 7.1% to 36.1%) (Please refer to Figure 2).

Sime Darby - UMW Merger = Yes!

On a separate note, Sime Darby Berhad (SIME) announced that it has obtained shareholders' approval to acquire UMW Holdings Berhad (UMW) in an Extraordinary General Meeting (EGM) held yesterday. To recap, SIME has proposed to acquire PNB’s 61.2% stake in UMW for a cash consideration of RM3.57bn or RM5.00/share. Subsequently, SIME is obliged to extend a mandatory general offer (MGO) to acquire the remaining UMW shares not owned. (Please refer to our sector reports dated 25th Aug for more details).

Maintain Neutral

We reiterate our Neutral recommendation for the sector. Despite positive car sales momentum in 2023, we observe forward sales orders are showing signs of easing. This could translate to weaker sales in 2024 (estimated at 650k units). We expect stiff competition and carmakers may need to offer discounts to entice budget-conscious customers. Maintained SELL on BAUTO (TP: RM2.48). Meanwhile, we downgrade SIME (TP: RM2.50) to Hold and MBMR (TP: RM4.11) to SELL due to recent price rallies. Lastly, our TP for UMW is benchmarked to the general offer price of RM5.00/share offered by SIME. We advise shareholders to accept the offer.

Source: TA Research - 17 Nov 2023