KUALA LUMPUR: Sales volume in the automotive sector is expected to pick up in the coming months due to high order backlogs for Perodua and aggressive sales campaigns rolled out by various original equipment manufacturers (OEMs).
Hong Leong Investment Bank Bhd (HLIB Research) said the recent strengthening of ringgit bodes well for the sector, potentially offsetting the higher operating costs environment in the fourth quarter of 2024 (Q4 2024).
"We have also noticed more aggressive launches by Chinese OEMs with attractive pricing and features, which will provide stiff competition to incumbent OEMs," it said.
Malaysian Automotive Association (MAA) reported weak total industry volume (TIV) in September at 58,000 units, down 13.4 per cent year-on-year (YoY), mainly affected by planned shutdown maintenance and slower sales delivery for certain OEMs during the month.
Nevertheless, TIV registered a growth of 3.9% YoY for the year-to-date period until September, mainly driven by improved supply chain and deliveries for Perodua models (the national OEM still has relatively high backlog orders) and stronger Honda sales for their newly launched models.
HLIB Research maintained its TIV forecast for 2024 at 760,000 units with upside potential, given the still high order backlogs for Perodua and more aggressive sales activities by various OEMs in Q4 2024.
Its top picks are DRB-Hicom Bhd (Buy, TP:RM1.55) and MBM Resources Bhd (Buy, TP: RM6.80) for their strong leverage onto the national OEMs, i.e., Proton and Perodua, which are less subject to competitive pressure for pricing below the RM100,000 segment and potential export growth in the longer term.
"The upcoming wage hike for government employees will potentially support TIV, especially for the A-B segments," it added.