At full throttle

For one, sales of new models have exceeded expectations on the back of tax exemptions and increased industry volumes.

KUALA LUMPUR: With the reopening of the economy, UMW Holdings Bhd seems to have quite a lot going for it.

For one, sales of new models have exceeded expectations on the back of tax exemptions and increased industry volumes.

The first batch of UMW Toyota’s (UMWT) recently-launched Toyota Corolla Cross CBU (Completely Built-Up) units were fully taken up after less than a month of its launch in March. The company is in discussions with the government and its principal on the possibility of bringing in more units before it starts to locally assemble the model, which would tentatively begin in the fourth quarter (Q4) of 2021.

Meanwhile, UMWT’s associate, Perusahaan Otomobil Kedua Sdn Bhd (Perodua), has received about 15,000 bookings for the Ativa model since it started taking orders in mid-February. Based on Perodua’s initial sales target of 3,000 units per month, UOB Kay Hian Research (UOBKH) said this implied a five-month waiting period.

Sales of these new models are partially reflected in Q1FY21 sales, with UMW-related brands reporting total sales of 74,911 units, up 34.8% year-on-year.

“Backlog orders and sales tax exemption are likely to cushion the impact of the second movement control order (MCO). With the whole supply chain being allowed to operate this time round, the MCO impact will be a lot less severe as compared with the previous round.

“The introduction of several new models like Toyota Corolla Cross and Perodua Ativa might also help to bolster 2021 sales, ” UOBKH said in a report.

UMWT has yet to share the next model after the Corolla Cross, but it has reiterated that the decision will be made based on the saleability of the model.

The research house noted that UMWT will also be stepping up efforts to introduce more locally assembled models to ensure its products are more competitively priced given the domestic automobile market’s growing competitive landscape.

UOBKH has maintained its “buy” call on the stock with a slightly higher target price of RM3.80.

Compared with its closest competitor, Honda, which locally assembles most of its products, UMWT locally assembles only seven of its 15 Toyota offerings.

Also, to differentiate itself, UMWT will leverage on Toyota Capital’s easy ownership scheme, Toyota EZ Beli, which lowers the barriers of entry for buyers. The scheme is gaining traction, especially among first-time car buyers, and now contributes about 13% of Toyota Capital’s financing portfolio.

The company also said it would continue to focus on online sales channels to leverage recent e-commerce trends and provide continuous support to its dealers as part of its customer experience enhancement plan.

With its near-term prospects looking up, UMW is also identifying opportunities for its long term plans.

UMW is not ruling out potential merger and acquisitions or major investments should a good opportunity arise, especially in its area of interest within the mobility ecosystem.UOBKH noted that UMW continues to receive orders from Rolls Royce for 2021 under its aerospace segment while exploring diversification opportunities within the high-value manufacturing space by leveraging on the division’s engineering capabilities.

While the brokerage expects sales to slow down for two to three months after the year-long sales tax exemption ends on June 30, sales should gradually recover going into Q4 as distributors gear up their year-end promotional activities.

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UMW , automobile , sales , high gear , tax , exemption ,


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