PETALING JAYA: The fuel subsidy rationalisation is likely to hurt the demand for mid-market car models, even though it is expected to be business as usual for the affordable segment in 2024.
This gives rise to a two-speed automotive market locally this year, said Kenanga Research.
The research house maintains its 2024 forecast of domestic new vehicle sales, also known as total industry volume (TIV), at 740,000 units. This is a tad more conservative than the 765,000 units projected by the Malaysian Automotive Association (MAA).
This is so since it believes e-invoicing and the petrol subsidy rationalisation in the second half of 2024 will weigh down on vehicle sales.
Kenanga Research has maintained its “neutral’’ stand on the sector and its sector top pick is MBM Resources Bhd
.
It has an “outperform’’ call on the stock with a target price of RM6.30 a share.
MBM Resources is a good proxy to the affordable and fuel-efficient Perusahaan Otomobil Kedua Sdn Bhd or Perodua brand. It also offers an attractive dividend yield of about 7%, it said.
The industry’s earnings visibility is still good, backed by a booking backlog of 170,000 units as at end-July 2024, unchanged from a month ago.
More than half of the backlog is made up of new models.
This alludes to the appeal of new models to car buyers. This trend is likely to persist throughout 2024, given a strong line-up of new launches.
It said vehicle sales will also be supported by new battery electric vehicles (BEVs) that enjoy the sales and service tax or SST exemption and other electric vehicle (EV) facilities incentives up until 2025 for completely-built-up models, and 2027 for completely-knock-down models.
The new registration for BEVs leapt from 274 units in 2021 to over 3,400 units in 2022, 10,159 units in 2023 and 6,617 units for the first half of 2024.
It expects more favourable incentives from the government that has set a national target for EVs and hybrid vehicles of 15% of TIV by 2030 and 38% by 2040.
The government will speed up the approval for charging stations.
The number of charging stations in operations currently at 3,951 should almost triple to 10,000 by end-2025.
The sector’s earnings delivery versus Kenanga Research’s expectations saw a deterioration in the recently concluded second-quarter 2024 results season.
According to the MAA, new vehicle sales in the country dropped 2.3% year-on-year in August. TIV stood at 71,162 units in August compared to 72,844 units sold in the same month last year.
