Signs of peaking momentum in the auto sector


PETALING JAYA: The automotive sector is poised to achieve a record-breaking total industry volume (TIV) for the second consecutive year, but the road ahead is far from clear.

The industry, currently riding on the momentum of robust sales and strategic investments, is expected to navigate through the uncertainties that loom on the horizon in the coming year.

MIDF Research expressed its cautious stance, pointing to signs of peaking momentum.

Despite a solid order backlog and near-term revenue visibility, concerns about consumer sentiment, potential fuel subsidy rollbacks and higher service taxes add a layer of uncertainty for 2024.

“At this juncture, however, we do not expect a drastic fall in TIV as demand could still remain supported by sustained improvement in underlying employment and income conditions,” MIDF Research, which maintained its “neutral” call on the sector, noted in a report.

Meanwhile, Hong Leong Investment Bank (HLIB) Research projects a positive spin for the year, anticipating a new high in TIV at over 790,000 units, driven by high industry order backlogs and attractive new launches.

However, the brokerage maintains a “neutral” rating, anticipating a potential normalisation in 2024 post-fulfillment of high backlog orders.

RHB Research, on the other hand, acknowledges the likelihood of yet another record-breaking TIV in 2023. Despite the positive momentum this year, it retains a “neutral” call, citing a lack of catalysts to sustain the sector’s sales drive into 2024.

The uncertainty surrounding the outlook for the following year raises concerns, and RHB Research anticipates a potential softening year-on-year.

“Despite a potential record-breaking 2023, an uncertain 2024 outlook could weigh on sector sentiment,” RHB Research added.

On the flip side, Kenanga Research adopts a more optimistic stance, emphasising the industry’s robust earnings visibility.

Bolstered by a substantial booking backlog of 235,000 units, deliveries from this backlog are expected to spill over into next year, it explained.

Kenanga Research’s positive outlook is further fuelled by the rising excitement in the electric vehicle (EV) segment.

Recent launches of the BYD Seal and Tesla Model 3, coupled with the expanding EV charging infrastructure, contribute to the buoyancy in this particular market segment.

In the midst of this dynamic landscape, the sector witnessed a couple of promising announcements that might redefine the industry.

Chinese automaker Zhejiang Geely Holding Group Co Ltd is set to inject US$10bil (RM46.7bil) into Tanjung Malim, Perak, aiming to transform it into the region’s largest auto city.

In collaboration with DRB-Hicom Bhd, the Automotive High-Technology Valley development is set to go beyond conventional vehicle production.

Meanwhile, Sime Darby Bhd made waves with its strategic acquisition of a 61.2% stake in UMW Holdings Bhd, valued at RM3.57bil in cash.

This deal, one of Malaysia’s largest merger and acquisition transactions, positions Sime Darby as a leading player in the country’s automotive sector.

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Auto , TIV , BYD , Tesla

   

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