The first five months of 2024 saw a surge in the total industry volume (TIV), driven by several factors such as, i) the launch of appealing new models, ii) companies expedited new car productions and deliveries, and iii) promotional campaigns for Hari Raya. We expect car sales to stabilise in 2H24, as there is an absence of major catalysts to drive vehicle sales to another record high. With that, we forecast a reduced TIV of 700,000 units (-12.5% YoY) for the year. Additionally, we anticipate that the targeted fuel subsidy scheme will impact car sales. Meanwhile, with a diverse range of car brands entering the local market and a deluge of new electric vehicles (EVs), this will certainly spark fierce price competition. Overall, we maintain our Neutral recommendation for the sector.

Review of 1H2024

The total industry volume (TIV) for the initial five months of 2024 saw an 8.3% YoY increase, reaching 328.9k units, primarily fuelled by the passenger car segment, up 11.1% YoY to 301.1k units. This growth was more than offset the decline in the commercial vehicle segment, which dropped to 27.8k units (-14.7% YoY). The upturn in passenger vehicles was notably driven by heightened sales from Perodua (+19.6%) and Honda (+13.9%).

On the earnings report card, two companies exceeded expectations, while another met estimates, thanks to improved supply chain conditions and accelerated deliveries ahead of the Hari Raya festivities. SIME outperformed with higher profits, driven by its industrial division and contributions from UMW consolidation, while MBM's profits remained unchanged, with decreased margins in its Motor Trading Division. Conversely, BAuto experienced a lower profit due to reduced sales volume and unfavourable sales mix. Overall, the sector's earnings increased by 26.6%  YoY and 8.7% QoQ.

Source: TA Research - 2 Jul 2024