PETALING JAYA: The local automotive industry is expected to suffer a net loss of RM350mil in 2016 compared with a net profit of RM1.2bil in the previous corresponding period due to weaker sales, poor consumer sentiment and stringent loan approval rates.
As a result of lower sales volume, sector revenue fell 13.8% in 2016, said CIMB Research in a report yesterday.
“It also took a big hit from the depreciation of the ringgit against the dollar and yen, given that most of the cost components such as the imported completely-built-up models and completely-knocked-down kit components are derived in foreign currency,” it added.
For the 11-month period ended November 2016, the research house pointed out that total industry volume (TIV) fell 12.5% year-on-year to 515,000 units due to weaker consumer sentiment and tightening credit from financial institutions.
“The total hire purchase loans approval lost 3.5 percentage points year-on-year to 52.9%, while the total loans applied amount also dropped 9.4% or RM7.7bil in 2016.
“The lower TIV was also attributable to higher car prices as several auto companies raised their prices in 2016,” said CIMB Research.
The research house is maintaining its “underweight” call on the sector due to persistent weakness in consumer sentiment and potential margin erosion from higher operating expenditure and intense competition.
“The sector trades at 0.7 times 2018’s price-to-book value, slightly above its historical mean of 0.6 times.
“Hence, there are still downside risks if sector earnings continue to disappoint in 2017.
“Key upside risk to our call are better-than-expected recovery in TIV sales and strengthening of the ringgit.”
CIMB Research added that it forecasts a tepid TIV growth of 2% in 2017, driven by sales recovery in domestic brands following the multiple new model launches at end-2016.
“We expect national brand volumes to grow by 4% to 5%, while foreign brand volumes to drop by 1% to 2% in 2017.”
The research house said it expects consumer sentiment to stay weak at least until the second half of 2017, given the uncertainty in the domestic economy amidst currency volatility.
“Hence, we believe that consumers may continue to delay their big ticket item purchases till the later part of this year.”
Going forward, CIMB Research said it expected local brands to regain market share in 2017 on the back of renewed consumer interest after five new model launches by Proton and Perodua in the second half of 2016.
As at November 2016, Proton sold 65,067 units – placing it in third position of TIV. Leading the pack is Perodua with 182,485 units, followed by Honda with 80,369 units.
Since coming out of the global financial crisis, the Malaysian automotive industry has been cruising steadily upwards in terms of sales over the past five years, hitting a record-breaking 2015 with TIV of 666,674 units.
The Malaysian Automotive Association slashed its 2016 TIV forecast downwards to 580,000 units.
With year-to-date November sales last year falling more than 80,000 units short of the previous corresponding period’s 597,306, Malaysian automotive sales for 2016 could be hitting its lowest mark in six years.
Source: The Star
Read More: http://www.thestar.com.my/business/business-news/2017/01/17/auto-business-seen-losing-rm350mil/
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