New vehicle sales in Malaysia, also known as total industry volume (TIV), came in at 57,991 units in Apr 2024. It declined 18% MoM due to a shorter working month on the back of Hari Raya Aidilfitri but still grew 21% YoY, reflecting the resilience of the local automotive industry. With 4MCY24 TIV making up 37% of our full-year projection of 710k units (-11% YoY), we consider the number meeting our expectation. Our full-year projection is a tad lower than the 740k units projected by Malaysia Automotive Association (MAA). We believe while it will be business as usual for the affordable segment, fuel subsidy rationalisation will likely hurt the demand for mid-market models, giving rise to a two-speed automotive market locally in CY24. In general, the industry’s earnings visibility is still good, backed by a booking backlog of 200k units. Our sector top pick is MBMR (OP; TP: RM5.80), which is a good proxy to the affordable and fuel-efficient Perodua brand. It also offers an attractive dividend yield of about 9%.

TIV of 57,991 units in Apr 2024 declined 18% MoM due to a shorter working month on the back of Hari Raya Aidilfitri but still grew 21% YoY, reflecting the resilience of the local automotive industry. With 4MCY24 TIV making up 37% of our full-year projection of 710k units (-11% YoY), we consider the number meeting our expectation. Looking ahead, we believe May 2024 TIV will be higher than April 2024 with the absence of long festive holidays as well as being boosted by attractive promotional campaign i.e. Malaysian Autoshow 2024 which is the largest auto show in Malaysia.

A detailed analysis of the passenger vehicle segment in April 2024 at 53,253 units (-18% MoM, +25% YoY) are as follows:

Overall, passenger vehicles segment plunged MoM largely due to the extended Hari Raya Aidilfitri holidays, but remain on a growth trajectory YoY

Perodua’s (-7% MoM, +43% YoY) sales continued to be propelled by the all-new Perodua Alza and all-new Perodua Axia, with equally strong sales of the Bezza, MyVi, Ativa models. Based on sales projection, Perodua currently has more than 120k backlogged orders (up to 12 months for the Axia, Alza and Bezza, and up to 4 months for the Ativa/Myvi models). Proton’s (-13% MoM, +18% YoY) sales were mainly driven by the all-new X70, X50 and X90 (2,437 SUV units sold, making up 22% of sales), and supported by the all-new S70, as well as face-lifted Persona, Iriz, Exora and Saga (collectively known as PIES). Based on sales projection, Proton currently has 31k backlogged orders (up to 12 months for the X50 and by 5 months for other models). Nissan (- 15% MoM, -14% YoY) is still losing out in the all-new vehicles race and mainly depends on its massive rebates to stay in competition. Currently, Nissan depends on the face-lifted Nissan Serena S-Hybrid, Navara, and Almera Turbo with 1k backlogged orders (1-2 months). Mazda (-18% MoM, -9% YoY) was driven by exceptional response for its Mazda CX-30 CKD, the CX-5 and CX-8. Based on sales projection, Mazda currently has 3k backlogged orders (3-5 months). Competition-wise, Mazda is seen to be losing its market share to the newcomer, Chery (YTD 2024 sales at 5,777 units closing in to Mazda’s at 5,846 units). Toyota’s (-19% MoM, +17% YoY) sales were driven by its popular top models, namely the all-new Vios, Yaris, Corolla Cross and Hilux. Based on sales projection, Toyota currently has 20k backlogged orders (3-6 months). Honda (-43% MoM, +2% YoY) sales were driven by the City, Civic and all-new HR-V. Based on sales projection, Honda currently has 15k backlogged orders (2-4 months). Competition-wise, Honda top-variants i.e HR-V and CR-V are also seen to be losing its market share to the newcomer, Chery.

Business as usual for the affordable segment. For CY24, we project a TIV of 710k units (-11%) which is a tad more conservative than 740k units projected by Malaysia Automotive Association (MAA). We believe while it will be business as usual for the affordable segment, fuel subsidy rationalisation is more likely to hurt the demand for mid-market models, giving rise to a two-speed automotive market locally in CY24.

We believe a new car is still an affordable luxury for most Malaysian households despite the high inflation and a slowing global economy underpinned by: (i) strong consumer confidence supported by a stable economy and a healthy job market, (ii) the affordability of motor vehicle underpinned by stable new car prices thanks to the deferment of new excise duty regulations (that could have resulted in prices of locally assembled vehicles increasing by 8%-20%) and potentially cheaper hire purchase cost with the introduction of the reducing balance method in the calculation of interest charges, and (iii) attractive new models.

We believe it will be business as usual for the affordable segment as its target customers, i.e. the B40 group, will be spared the impact of the impending fuel subsidy rationalisation and also could potentially benefit from the introduction of the progressive wage model. However, the same cannot be said for the mid-market segment as its target customers, i.e. the M40 group may hold back from buying a new car (or even down trade to a smaller car to cut their fuel bills) upon the introduction of fuel subsidy rationalisation. In general, the industry’s earnings visibility is still good, backed by a booking backlog of 200k units as at end-April 2024. More than half of the backlog is made up of new models, alluding to how appealing new models are to car buyers. This trend is likely to persist throughout CY24 given a strong line-up of new launches.

More battery electric vehicles (BEVs) in the market. Additionally, vehicle sales will be supported by new BEVs that enjoy SST exemption and other EV facilities incentives up to CY25 for CBU and CY27 for CKD. BEV new registrations have leapt from 274 units in CY21 to over 3,400 units in CY22 and 10,159 units in CY23, with 2,703 units for YTD 2024 and are on track to meet national target for EVs and hybrid vehicles of 15% of total industry volume (TIV) by CY30, and 38% of TIV by CY40. Meanwhile, the government’s pledge to enable charge point operators (CPOs) to secure faster approvals for installation provides comfort as currently only 2,020 EV charging stations have been built to-date.

Our sector top pick is MBMR for: (i) its strong earnings visibility backed by an order backlog of Perodua vehicles of 120k units (almost half of its CY24 target sales of 340k units), (ii) being a good proxy to the mass-market Perodua brand given that it is the largest dealer of Perodua vehicles in Malaysia, as well as its 23% stake in Perusahaan Otomobil Kedua Sdn Bhd, the producer of Perodua vehicles, and (iii) its attractive dividend yield of about 9%.

Source: Kenanga Research - 23 May 2024