KUALA LUMPUR – The automotive sector’s total industry volume (TIV) is expected to hit between 600,000 and 650,000 units this year based on the forecasts made by several research houses.
Hong Leong Investment Bank (HLIB) Research expects TIV to reach 600,000 units in 2022, 17.9% higher than the 508,911 units recorded last year, on the expectation of continued high order deliveries in the coming months.
A note today said the original equipment manufacturers are looking to accelerate production and imports to fulfil the huge order backlogs and reduce the waiting period.
The backlogs were driven by the automotive sales and service tax (SST) exemption coming to an end, though it is still applicable for bookings made by June 30, 2022, and deliveries done by March 31, 2023.
“We believe the current order backlog for the industry remains strong at over 300,000 units. Despite the expected strong TIV recovery until year-end (backed by the high order backlogs), we still maintain our ‘neutral’ rating on the sector, as we expect TIV to slow down in 2023,” HLIB Research added.
Meanwhile, Kenanga Research is maintaining its “overweight” call for the automotive sector with TIV targets of 650,000 units for 2022 and 660,000 units for next year, compared to the Malaysian Automotive Association’s targets of 630,000 units and 636,000 units, respectively.
“To ensure consumers keep returning to their showrooms, automakers are putting onto the market newer models that also command better margins. Currently, vehicle order backlogs are reaching some 350,000 units.
“Not all of these, particularly new models with a waiting period of beyond 12 months (such as Perodua Alza), will be delivered and registered before end-March 2023 to enjoy the SST exemption (despite the bookings being made prior to end-June 2022). This means TIV will not fall off the cliff after March 2023,” it said in its note.
Additionally, it said, there will be launches of new battery electric vehicles that will still enjoy SST exemption and other electric vehicle facilities incentives up to 2024 for completely built-up units and 2025 for completely knock-downs, underpinning the TIV.
MIDF Research, on another note, has projected a TIV of 607,000 units for 2022 but cautioned that the November to December 2022 TIV could weaken as buyers opt for the new year 2023 registrations.
The research house remains positive on the automotive sector as a play into domestic consumption’s recovery.
“Notwithstanding normalisation in overnight policy rate and higher inflation (which in the Malaysian context is much better contained), prospects are underpinned by strong order banks and an improving labour market and household income condition, while valuations are 25 to 40% below historical mean.
“Additionally, auto players under our coverage (excluding Tan Chong Motor) are sitting on a strong net cash pile, which makes up 20 to 30% of their respective market caps – this underpins attractive dividend payouts for the year, we believe,” it said.
It added that key risks to its call are a prolonged and significant spike in inflation, deterioration in broad economic recovery and a weaker-than-expected ringgit. – Bernama, October 20, 2022
