Original equipment manufacturers (OEM) would have to leverage onto attractive new models and sales programmes in order to sustain sales, said HLIB Research.
PETALING JAYA: The total industry volume (TIV) is expected to start the year on a high note in 2023, led by accelerating deliveries to meet the high order backlogs prior to the ending of the sales and service tax (SST) exemption by end-March last year.
But a slowdown is expected by the second quarter of 2023 (2Q23) due to declining new orders as consumers would have already brought forward their purchases.
Hence, the original equipment manufacturers (OEM) would have to leverage onto attractive new models and sales programmes in order to sustain sales, said Hong Leong Investment Bank (HLIB) Research.
It said attractive new launches planned for the year include Proton’s new Geely-based models, Perodua’s new Sedan model, the Aruz facelift and Axia facelift, Honda’s new WR-V, CR-V and BR-V as well as Toyota’s new Vios and Yaris.
Subsequently, the TIV will likely recover towards end-2023 due to normalising demand and more aggressive year-end sales, it said.
It expects TIV to achieve a new record high of about 700,000 for 2022.
For 2023, it expects the TIV to normalise back to 630,000 units, mainly due to the removal of SST-related exemption measures.
On consumer sentiment and quoting the Malaysian Institute of Economic Research’s Consumer Sentiment Index, HLIB said there was an uptrend since the lows during the pandemic in 1Q20.
Factors that will affect consumer sentiment in purchasing a new car include the expected continued hike in the overnight policy rate in 2023 to 3.25% (from 1.75% in early 2022).
It estimates a 25-basis-point effect on monthly installments of up RM15 per month. This is based on a RM80,000 car price, with 90% loan application for a nine-year loan period.
The ringgit/dollar appreciation is anticipated to have an impact. The stronger ringgit is expected to lower the effective input costs for imported completely-built-up units, completely-knocked-down packs and raw materials, as well as subsequently improve margins for OEMs.
HLIB expects earnings for the sector except for DRB-Hicom Bhd
, leveraging on Proton sales growth, to drop in 2023 due to lower sales volume and higher operating costs.
Its top pick is DRB-Hicom with a “buy” call on a target price (TP) of RM2.24 a share.
Another “buy” pick is MBM Resources Bhd (TP: RM5 a share), due to the company’s strong leverage on national OEMs, namely Proton and Perodua, which has more sustainable sales volume and potential export growth in the longer term.
