Automotive sector’s negative outlook maintained

  • Business
  • Wednesday, 22 Jun 2016

PETALING JAYA: RAM Rating Services Bhd has maintained its “negative” outlook on the Malaysian automotive sector and expects total industry volume (TIV) to contract up to 10% this year, following a 17.6% year-on-year (y-o-y) plunge in vehicle sales to 218,101 units in the first five months of 2016.

In a statement yesterday, RAM head of consumer and industrial ratings Kevin Lim said poor consumer sentiment, compounded by the front-loading of sales last year, had resulted in the severe downtrend in TIV.

“Consumer confidence is expected to remain weak this year, owing to the uncertain economic environment, the rising cost of living and tighter credit conditions.

“These challenges will pose a severe drag on automotive sales, although a slight uptick is anticipated in the second half, in view of the introduction of significant new models.”

CIMB Research said it was maintaining a “neutral” stance on the local automotive sector.

“Given the weak consumer sentiment and higher car prices as a result of increasing input cost, consumers are holding off purchasing big-ticket items.

“Despite upcoming new launches in the remainder of the year and promotional campaigns by manufacturers running up to the Hari Raya period, we expect full-year sales volume to decline y-o-y.”

TIV in the first five months of the year dropped 18% to 218,113 units, the weakest first five months of the year since 2009, CIMB Research noted.

“Despite upcoming new launches expected in the second half of 2016, growth will be weighed down by the continued weak sentiment. We have cut our sales volume forecast from 667,000 to 613,000 units and assume conservative growth in the remaining months of the year.”

MIDF Research also said it was maintaining a “neutral” outlook on the automotive sector.

“Demand remains weak with little waiting list except for recently-launched models such as the Hilux, CX5 facelift and the new Perdana, while sales are still heavily incentivised.

“The slower sales also reflect the numerous price hikes implemented by all key players in the first four months of the year. June sales could strengthen further, sequentially driven by pre-festive (Raya Aidilfitri) buying and the recent new Perdana launch by Proton.”

RAM Ratings cautioned that the worst may not be over for some players in the sector, due to the continued tough operating environment this year.

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