PETALING JAYA: The local automotive industry could see its annual total industry volume (TIV) hit a record high in 2022, should delivery momentum be sustained throughout the last quarter of this year.
In a report, RHB Research said the monthly TIV is sustaining at a high level, mainly due to recovering production even as supply chain woes held back sales in previous months.
“Although new car orders have gradually recovered after falling significantly in July, they remained about 20% to 30% lower than the first half of 2022 (1H22) average,” the research house added.
In view of macroeconomic headwinds such as increased cost of borrowing, cost of living and rise in automobile prices in 2023, RHB Research said new car orders in 2023 would likely remain subdued.
In a statement on the production and sales for September, the Malaysian Automotive Association (MAA) noted that TIV sustained at 67,659 units, 0.1% higher than in August, as companies continued to fulfil bookings received prior to June, 30, where customers were enjoying the sales and service tax exemption.
The number of cars sold in September surged by 53% to 67,659 units from 44,227 units a year earlier, bringing year-to-date TIV to 516,798 units.
“Should the monthly TIV in the last quarter of 2022 (4Q22) continues to remain at about 68,000 units, there is upside risk to our current 2022 forecast of 650,000 units,” RHB Research said.
Assuming monthly TIV over October to December amounts to about 68,000 units, 2022’s TIV could reach 720,000, a potential annual record high, RHB Research pointed out.TA Research said the significant year-on-year improvement is on the back of the nationwide lockdown imposed by the government and the chip shortage last year, which had heavily affected sales of certain car makers.
According to MIDF Research, there is solid revenue visibility for automobile makers, owing to the industry’s strong order book.
“Overall, players are sitting on an implied seven to 12 months waiting list,” it said.
MIDF Research noted that new bookings from July 2022 onwards would likely feed into TIV from April 2023 onwards, further cementing this revenue visibility from strong forward bookings.
It also noted that the 3Q22 results season appeared like another strong quarter, owing to the further 7.7% quarter-on-quarter growth in TIV to 185,125 units.
However, the research house said a potential dampener could be the stronger US dollar which could impact certain players such as UMW Holdings Bhd
and Tan Chong Motor Holdings Bhd.
“Of the two, the former’s exposure to the US dollar is far more diluted given earnings contribution from 38%-owned Perodua, which is highly localised.
“Hence, it is not much impacted by foreign exchange volatility,” MIDF Research said.
The research house estimated that UMW Toyota made up circa 30% to 40% of overall group earnings.
“Tan Chong’s earnings, however, are concentrated on its Nissan distribution business which relies on dollar-denominated completely-knock-down units or completely-built-up imports,” it added.
MIDF Research and TA Research maintained their “positive” and “overweight” calls on the automotive sector, respectively, with MBM Resources Bhd and UMW Holdings Bhd being their top picks.
Being cautious of macroeconomic headwinds that could weigh on 2023 car sales and earnings, RHB Research had retained its “neutral” call on the sector, although it is expecting strong sector earnings in 2H22.
