PETALING JAYA: The outlook for the automotive sector for the rest of this year remains clouded amid the uncertainties over the impact of the revision of the National Automotive Policy under the Pakatan Harapan-led government.
“While nothing (on the policy) is revealed yet, there is a risk of a change in the tax structure, which could affect the whole industry. News on the delay of the approval on new model prices also raises regulatory risk,” RHB Research Institute Sdn Bhd said in a note last Friday.
RHB Research downgraded the sector to “neutral” from “overweight” after recently downgrading its call on UMW Holdings to “neutral” from “buy”. Its top picks are Bermaz Auto and DRB-Hicom.
It forecasts 2% growth for 2019 total industry volume (TIV) to 610,000 units on several interesting models introduced/planned this year to renew consumer interest.
However, it said if the US dollar continues to exhibit a weakening bias as it expects, sentiment on the sector should likely trend positively.
Meanwhile, Kenanga Research, which kept its “neutral” outlook on the sector, maintained its TIV target of 590,000 units for 2019, which is below the Malaysian Automotive Association’s (MAA) target of 600,000 units.
The research firm said this because it had factored in the possible delay in pricing approval for the new launches from authorities, absence of sales boosting factor, such as the tax-holiday, and tepid purchasing power given the weak consumer sentiment.
KAF Research, however, said it is maintaining its 600,000 TIV target for 2019 – representing a 0.2% growth from 2018, premised on a higher base seen last year following the strong sales during the tax holiday period.
It added that its target is in line with MAA’s 600,000 units forecast as the association expects slower sales amid a subdued economic growth and moderate consumer spending.
“We expect TIV to be mainly driven by Perodua, which commands 38% of industry car sales,” it added.
However, RHB Research said it believes that it will be challenging for Perodua to repeat its performance in 2018, as the demand for Myvi could ease during its second year.
“Demand on the recently launched Perodua Aruz, however, should provide some support to sales volume. We estimate Perodua sales at 222,000 units in 2019, implying -2.3% year-on-year,” it added.
