Estimates for total industry volume (TIV) range from 600,000 forecast by Hong Leong Investment Bank (HLIB) Research to 650,000 by Kenanga Research.
However, views on the sector’s performance for 2023 is mixed. HLIB expects to see a decline but Kenanga and the Malaysian Automotive Association (MAA) have forecasted continued, albeit slower, growth.
HLIB Research said the TIV would reach 600,000 this year, a 17.9% increase over the 508,911 units recorded in 2021.
In a note today, it said original equipment manufacturers are looking to accelerate production and imports to fulfil the huge order backlogs and reduce the waiting period.
The backlogs were driven by the automotive sales and service tax (SST) exemption coming to an end, though it is still applicable for bookings made by June 30, 2022, and deliveries done by March 31, 2023.
“We believe the current order backlog for the industry remains strong at over 300,000 units. Despite the expected strong TIV recovery until year end (backed by the high order backlogs), we still maintain our ‘neutral’ rating on the sector, as we expect TIV to slow down in 2023,” HLIB Research added.
On the other hand, Kenanga is maintaining its “overweight” call for the sector. It expects the TIV to reach 650,000 this year, accounting for a 27.7% rise, and up to 660,000 next year.
MAA also expects to see an increase — to 630,000 this year and 636,000 next year.
Kenanga said automakers are putting onto the market newer models that also command better margins to ensure consumers keep coming back to their showrooms.
Currently, vehicles order backlogs are reaching 350,000 units.
“Not all of these, particularly new models with a waiting period of beyond 12 months (such as Perodua Alza), will be delivered and registered before end-March 2023 to enjoy the SST exemption (despite the bookings being made prior to end-June 2022). This means TIV will not fall off the cliff after March 2023,” it said in its note.
Additionally, it said, there will be launches of new electric vehicles that will continue to enjoy SST exemption and other electric vehicle facilities incentives up to 2024 for completely built up units and 2025 for completely knocked down units, underpinning the TIV.
MIDF Research, in another note, has projected a TIV of 607,000 units for 2022 but cautioned that the November-December 2022 TIV could weaken as buyers opt for new registrations in 2023.
The research house remains positive on the automotive sector as a play into domestic consumption’s recovery.
“Notwithstanding normalisation in overnight policy rate and higher inflation, which in the Malaysian context is much better contained, prospects are underpinned by strong order books and an improving labour market and household income condition, while valuations are 25%-40% below historical mean.
“Additionally, auto players under our coverage (excluding Tan Chong Motor) are sitting on strong net cash piles, which make up 20% to 30% of their respective market caps – this underpins attractive dividend payouts for the year, we believe,” it said.
It added that key risks to its call are a prolonged and significant spike in inflation, deterioration in broad economic recovery and a weaker-than-expected ringgit.