"We believe that national marques would fare worse than non-national marques with their target market of lower to mid-income segment likely to suffer most financially," it said.
The research house has an underweight call on the sector, having cut its 2020 total industry volume target to 420,000 units, which is 31% lower year-on-year.
It has downgrades on Bermaz Auto, UMW, DRB-Hicom, MBM Resources, Perodua and Sime Darby while maintaining Tan Chong as it had already factored in the negatives.
The second quarter of the year is a "lost quarter" as all the showrooms, vehicle production and delivery were closed, halted or delayed from March 18 to May 3 due to the movement control order (MCO), said Kenanga.
"This is only to be expected given that showrooms are closed during the MCO and consumers are cautious on spending on high-value discretionary spending such as vehicles, imported goods and overseas travels," it said.
It added that planned new launches for the second half of the year could be pushed back given the weak consumer sentiment.
As at May 4, the MCO remains in effect despite some flexibilities, while nine states remains under strict restriction. Some showrooms, such as those belonging to Perodua, Nissan, Toyota and Honda, have reopened, while Mazda will reopen next week and Proton will gradually restart operations from today.
Assembly plants including that of Inokom and Proton remains closed while others such as Honda and Toyota have indicated a possible reopening next week, pending approvals.
However, Kenanga noted that some relief could arise from better incentives programme under NAP 2020 and the cut from Bank Negara's overnight policy rate and well as financial assistace to those impacted by Covid-19.
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