BARRING major surprises in the government's automotive policy statement or detailed plans for the sector's entry into the Asean free trade area (Afta) in 2005, total vehicle sales this year should match if not marginally outstrip last year's 435,000 units, according to industry observers.
A motor analyst who is neutral on the automotive sector says it is a difficult call to make on vehicle sales, but expects things to be clearer in the months ahead.
“January and February numbers will not be so clear given the war concerns and February's short month, but March and April sales figures should paint a clearer picture,” he said.
The government is expected to announce its auto policy details sometime in the 1st quarter of the year, details of which are expected to provide car manufacturers with a roadmap of sorts for the industry.
Indeed, industry players have been long waiting for the plans, even as the government has kept its cards very close to its chest. The government has not showed its hand, other than to stress that Malaysians can stop holding their breath if they think the prices of foreign makes would fall post-Afta, because they would not, given the government's need – among others – to have an income replacement for revenue lost from import duties.
In November and December last year, auto sales declined to 35,519 units and 27,720 units, respectively. But even coming down from last year's sector expansion of 9.7%, the Malaysian Automotive Association (MAA) has projected a 3.5% growth for the year to 450,000 units. A number of research houses are comfortable with the MAA forecast, with most of their predictions coming in at the 3% mark.
The low interest regime coupled with aggressive promotions and a growing population are expected to continue to lure buyers into showrooms. A caveat here - the strengthening of the Japanese yen could have an impact on prices and hence sales.
Research house GK Goh is maintaining an overweight stance on the sector. It said the weaker sales outlook for the next few years would restrain revenue growth, but noted that automakers are intensifying efforts to cut costs before 2005 when Afta kicks in.
Moreover, car prices are expected to hold steady through tax reforms.
“We had expected a narrowing of the pricing premium for non-national cars from as much as 40% currently to 25%-30% in the post-Afta period. Comments from government officials, however, suggest that the premium is likely to be maintained,” GK Goh said.
Another local motor analyst thinks the prices of Proton cars are also unlikely to increase too much post-Afta, given political sensitivities towards the national car. Proton lost a little of its grip on the car market last year, but still dominates with a 60% market share.
Also overweight on the sector is Mayban Securities, which believes that in term of valuations, the sector is trading at 8 times price earnings (PE) versus the market's 14 times PE.
In terms of car sales, it thinks car prices are unlikely to plunge post-Afta, while the federal government's investment of RM5.1bil in new road projects under the 8th Malaysia Plan (8MP) hould continue to spur car purchases.
Passenger cars still comprise a hefty 67% of total vehicle sales, but commercial vehicle sales grew strongly last year and is predicted to rise by 6.5% to 45,500 units this year.