CIMB Research retains Neutral on auto sector

CIMB Research expects Proton to regain sales volume following the recent launch of its new Perdana and two other models slated for launch in 2H16.

KUALA LUMPUR: CIMB Equities Research is retaining its Neutral stance on the automobile sector as consumers are holding off purchasing big-ticket items due to the weak consumer sentiment and higher car prices as a result of increasing input cost.

It said on Tuesday despite upcoming new launches in the remainder of the year and promotional campaigns by manufacturers running up to the Hari Raya period, it expects full-year sales volume to decline on-year. Berjaya Auto remains its top pick for the sector

CIMB Research said sales of new vehicles fell 12.8% on-year in May due to the persistent weakness in consumer sentiment on the back of economic uncertainty and GST implementation. 

Also the total industry vehicle (TIV) sales for January to May 2016 dropped 18% to 218,113 units, the weakest first five months of the year since 2009. 

“Despite upcoming new launches expected in 2H16, growth will be weighed down by the continued weak sentiment. We cut our sales volume forecast from 667,000 to 613,000 units (-8.0% on-year) and assume conservative growth in the remaining months of the year,” it said.

CIMB Research said on a monthly basis, TIV sales improved 6% due to the 39.4% jump in sales of commercial vehicles (CV). This was led by Toyota, whose CV sales more than tripled in May. 

“We believe the spike was driven by the launch of its ubiquitous Hilux pickup earlier in the month. We expect consumer purchases in the coming months to be boosted by promotional campaigns running up to Hari Raya and recent launches such as the all-new Honda Civic and Proton Perdana.

“All marques have been seeing declining sales year-to-date (YTD). Proton experienced the biggest decline among the mass-market marques in 5M16, down 85% on-year, closely followed by Nissan (-83.1%) and Perodua (-81.2%). 

“We expect Proton to regain sales volume following the recent launch of its new Perdana and two other models slated for launch in 2H16. As there will be no major launches from Nissan expected at least until next year, we expect Nissan to continue experiencing a downtrend in sales volume,” it said.

CIMB Research said Perodua continued to dominate market share at 34.1%, albeit down from 35.3% at end-April. This was followed by Toyota, which saw its share rise to 13.7% from 9.7%, overtaking Honda. The runner-up spot has generally been hotly contested between Toyota, Honda and Proton.

It added that with the recent launch of its all-new Civic, Honda should regain market share in the coming months.