PETALING JAYA: Although there was year-on-year growth in automobile sales for the first quarter (1Q24), analysts maintain their expectation that sales for the year will moderate from the all-time high of nearly 800,000 units in 2023.
According to them, there is an absence of catalysts driving sales, which led to the conclusion that the current total industry volume (TIV) levels are not sustainable.
Moreover, analysts expect the upcoming subsidy rationalisation to impact mid-market segment sales, but they remain optimistic about the affordable segment.
TA Research analyst Angeline Chin told StarBiz that car sales in 1Q24 remained high primarily due to promotions related to festive celebrations, particularly during Hari Raya sales. Looking ahead, she expects the sales to decline, maintaining her projection of a TIV of 650,000 units for 2024.
Chin expects the upcoming fuel subsidy rationalisation to initially impact consumer behaviour and demand within the auto sector. “Over time, however, the effects are anticipated to normalise, with potential shifts towards lower engine segments,” she said.
When asked if this will lead to increased electric vehicle sales, Chin said while there might be some impact, it may not be very significant, depending on how the subsidy rationalisation is structured.
Similarly, RHB Research’s Syahril Hanafiah said that while TIV data for 1Q24 was unsurprisingly strong, car sales should normalise in the months ahead given the lack of catalysts to prop up vehicle sales and push it to another record high.
“While the 1Q24 TIV figure makes up over 30% of our 2024 TIV assumption of 625,000 units, we believe the current TIV levels are not sustainable, given the lack of drivers to boost sales to a new high after two record-breaking years.
“Therefore, we maintain our TIV forecasts and ‘neutral’ sector weighting for now. We prefer automotive names with cheap valuations with strong earnings growth visibility,” he said in a report on the automotive industry.
Touching on subsidy rationalisation, he said the impact would mainly be on the mid-market segment, as the low-income group is still expected to benefit from subsidies while high-income earners should be less affected by the ending of subsidies.
“We are positive on the salary revisions for civil workers, as the over 13% increment would be sufficient to entice consumers to spend on major purchases. However, we make no changes to our earnings assumptions for now, as the general sentiment on the sector remains subdued, given the uncertainty related to subsidy rationalisation,” he added.
Meanwhile, Kenanga Research analyst Wan Mustaqim Wan Ab Aziz expects a “two-speed” automotive market in 2024 as the affordable segment will continue business as usual, while the fuel subsidy rationalisation is likely to negatively impact demand for mid-market models.
“The B40 group will be spared the impact of the impending fuel subsidy rationalisation and also could potentially benefit from the introduction of the progressive wage model.
“However, the mid-market segment may hold back from buying a new car, or even down trade to a smaller car to cut their fuel bills upon the introduction of fuel subsidy rationalisation,” he said.
He added that the industry’s earnings visibility was still good, backed by a booking backlog of 200,000 units.
According to him, more than half of the backlog is made up of new models, alluding to how appealing new models are to car buyers. This trend is likely to persist throughout 2024, given a strong line-up of new launches.
