AmInvestment Bank Research said total industry volume will stabilise to historical norms this year.
KUALA LUMPUR: Vehicle sales could continue to post growth this year even as demand normalises from historic highs.
But for the automotive players in the country, they continue to face foreign exchange (forex) pressures on the upside and downside.
According to AmInvestment Bank Research, total industry volume (TIV) will stabilise to historical norms this year.
Pursuant to this, it is “neutral” on the sector as valuations are balanced, with the exception of Bermaz Auto Bhd
(BAuto), which retains a “buy” call by the research house.
“The health of car sales remained robust in the first quarter of the year (1Q24) with a growth of 4.4% year-on-year (y-o-y). This is despite the accelerated sales before the expiration of the sales and service tax exemption at the end of March last year,” it said.
“Honda and Perodua were the biggest winners in terms of y-o-y volume growth and market share gains, while Nissan, Proton and Toyota were the biggest losers,” the research house added.
Although the TIV in the first quarter is better than expected, AmInvestment Bank Research believes this was due to clearance of backlog orders from late-2023 and pre Chinese New Year orders.
The research house expects the TIV to taper down in subsequent quarters as demand normalises to historical norms, as it maintains its 2024 target of 670,000 units or a 16% y-o-y decline.
Meanwhile, it noted car loan books appear to be growing strongly at RM410bil or a 9.2% y-o-y growth in 1Q24.
This had outperformed Malaysia’s system loan growth of 6%. “The loan book makes up 19% of Malaysia’s total system loan book, which is a new record.
“The quality of the car loan book remains solid with a stable gross impaired loan ratio of 0.5% and non-performing loans are lower than the historical average, which suggests that the industry is not stressed and there is still room for growth,” it said.
On the forex front, the research house noted that it has been a mixed bag for companies operating in this space.
This is as the weak ringgit is generally bad for the Malaysian auto sector, as many components and parts are imported mainly from Thailand, Japan and South Korea, which are typically denominated in the US dollar, won or Japanese yen.
“The auto companies normally hedge their currency positions by buying three to six months forward, assuming the exchange rates are favourable,” it said.
Malaysia’s new vehicle sales slid 10% to 71,052 units in March 2024 from 78,881 units in March 2023.
Sales in March last year hit a record high, due to the fulfilment of bookings made during a sales exemption period that expired on March 31, 2023. Year-to-date sales for March 2024 were 5% higher at 202,245 units, compared with 192,615 units before.
