In a note, it said its projection is more upbeat than the forecast of 636,000 units by the Malaysian Automotive Association (MAA).

“We believe the odds are in favour of MAA raising its number along the way.

“The vehicle sales in 2023 will be driven by the continued delivery of order backlogs to the tune of 350,000 units (as of end-October 2022), which was unchanged compared to three months ago, indicating that deliveries had been replenished with strong new bookings especially for attractive new models even in the absence of the sales and service tax (SST) exemption.”

Additionally, the vehicle sales will be supported by launches of new battery electric vehicles which will enjoy SST exemption and other electric vehicle facilities incentives up to 2023 for completely built-up (CBU) and 2025 for completely knocked-down (CKD), it added.

Kenanga Research said vehicle sales would “remain robust” in 2023. This would be supported by reopening of the economy; financial assistance to the low-income group and subsidies on fuels, electricity and selected food items to keep the cost of living in check; a stable job market; and healthy household balance sheets of the M40 (middle 40% income) group.

The research house also said it was unperturbed by the impact of rising interest rates on vehicle sales.

“Assuming Bank Negara Malaysia raises the overnight policy rate (OPR) by another 25 basis points (bps) to 3% in January 2023, taking the total OPR hike for 2022 and 2023 to a total of 125 bps (from 1.75% to 3%), this would only raise the monthly instalment for, say a Perodua Myvi AV priced at RM60,000 (90% financing over five years), by about 6% from RM978 to RM1,035,” it said.

It also noted the actual interest rates charged vary based on terms, financiers, car models, and the individual’s credit score, and newer popular models are most likely to be charged a lower effective interest rate range.

On its sector top picks, it selected MBM Resources Bhd and Bermaz Auto Bhd.