KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) has upgraded its total industry volume (TIV) for the automotive sector to 760,000 units for this year from 720,000 units previously supported by stronger sales from Perodua and more active sales from other original equipment manufacturers (OEM).
It was noted that the order backlog has dropped to around 150–160,000 units from over 220,000 units at the end of last year. with the majority of the volume attributed to Perodua.
"We believe Perodua could sustain its sales volume until next year, as the national OEM continued to maintain its wave of new order intake and production volume for the year," it said on a note.
Nevertheless, added margins could still be affected by higher operational costs.
For the first half of 2024 (1H24), TIV increased 6.6 per cent year-on-year (YoY) to 390,300 units, mainly driven by the Perodua national marque's improved supply chains, production schedule, and ongoing strong demand, and the Honda foreign marque's improved supply chains and strong demand for their attractive new models, which were launched in 2H23.
Based on the first five months of 2024, national OEMs continued to lead the market with a combined 63.1 per cent of market share, as Perodua captured a larger slice at 44.4 per cent, while Proton slipped marginally to 18.7 per cent.
It added that the government continued to introduce more electric vehicle (EV)-friendly policies to push for higher EV adoption.
"We anticipate continued EV sales growth in the coming years, driven by attractive government policies, improved EV infrastructure, and aggressive new EV model launches with attractive promotional activities by existing OEMs and new entrances.
"However, we believe the overall adoption of EVs will still be relatively immaterial in the near term due to its relatively higher price and the lack of EV infrastructure."
The firm also expects automotive-related companies to benefit from the anticipated ringgit recovery against the greenback and the still-low yen.
It maintained a "neutral" call on the sector as it expects normalising of TIVs and margin deterioration in 2H24 due to more aggressive competitions and sales campaigns, especially for the RM100-200,000 priced market segment.
Its top picks are MBM Resources Bhd (TP: RM6.50) and DRB-Hicom Bhd (TP: RM1.65).