Weaker total industry volume seen for sector
Cautious outlook likely in the first quarter of the year
“We expect consumers to buy ahead of the implementation of subsidies rationalisation, namely the high value goods tax and fuel subsidy rationalisation.”
Wan Mustaqim Wan Ab Aziz
PETALING JAYA: Analysts do not discount the possibility of automotive sales for the first quarter of 2024 (1Q24) reaching or even exceeding the previous corresponding quarterly figures.
To note, year-to-date sales volume for February 2024 was 13% higher, at 128,332 units, compared to 113,729 units in the same period last year. In 1Q23, total industry volume (TIV) reached 192,474.
TA Research analyst Angeline Chin suggested a cautious outlook for 1Q24, anticipating industry sales to remain steady or experience a marginal dip.
Having an “underweight” rating on the sector, she said the marginal dip expectation is rooted to the all-time high monthly sales figures observed in March 2023, totaling 78,849 units, which were driven by a rush to deliver vehicles before the expiration of the sales tax exemptions.
Conversely, Kenanga Research analyst Wan Mustaqim Wan Ab Aziz expressed a more optimistic perspective, indicating the potential for surpassing previous records.
“We expect consumers to buy ahead of the implementation of subsidies rationalisation, namely the high value goods tax and fuel subsidy rationalisation (luxury car owners would not be eligible for fuel subsidy),” he said.
Shifting the focus to electric vehicle (EV) sales, he noted that local EV sales have experienced robust growth from a low base and are expected to continue growing, driven by attractive new launches and various incentives by the government.
However, he pointed out that EV sales still constitute a small percentage of the overall industry volume, at less than 2% of the TIV, despite their increasing popularity.
Meanwhile, Chin anticipates a significant surge in electrified vehicle (xevs) sales, encompassing hybrid electric vehicles, plug-in hybrid electric vehicles, battery electric vehicles and fuel cell electric vehicles.
She expects a doubling of sales within this segment for 2024, reaching a total of 76,000 units, compared to the 38,000 units sold in 2023.
She believes this uptick in XEV sales will inevitably erode the market share of traditional players.
“Those (companies) without EV offerings in their pipeline risk losing market share,” she noted.
Moreover, she said consumers are closely monitoring price trends, waiting for potential reductions, while intense competition among manufacturers is expected to drive prices downward.
On a broader perspective, following a record-breaking year in 2023, Chin anticipates a normalisation of the automotive sector in 2024, projecting a weaker TIV of 650,000 units, reflecting a negative growth of about 18.7% from the 799,731 units recorded in 2023.
She attributed this to the absence of tax incentives and a depleting order book.
Additionally, she highlighted the potential downside risk posed by the HVGT to the sector.
She also pointed out that the TIV calculation only includes members of the Malaysia Automotive Association (MAA), with Tesla being excluded from this calculation.
Wan Mustaqim, meanwhile, forecasts new vehicle sales to be at 710,000 units in Malaysia in 2024, slightly below MAA’S projection of 740,000 units.
He expects the impending fuel subsidy rationalisation to impact mid-market models but remains optimistic about affordable vehicle sales, particularly among the B40 group, citing potential benefits from progressive wage models.
Wan Mustaqim highlighted strong earnings visibility, backed by a 200,000 unit booking backlog, with over half comprising new models.
“More than half of the backlog is made up of new models, alluding to how appealing new models are to car buyers. We expect a similar trend in 2024, given an equally strong line-up of new launches during the year,” he said.
Despite challenges such as high inflation and a slowing global economy, Wan Mustaqim believes that owning a new car remains an affordable luxury for most Malaysian households.
This belief is supported by strong consumer confidence, a stable economy with a healthy job market, stable new car prices due to deferred excise duty regulations and the potential for cheaper hire-purchase costs with the introduction of the reducing balance method in the calculation of interest charges.