BMI View : Vehicle sales in the Malaysian auto sector grew 4.0% for the first six months of 2013, to 313,418 units. Although the passenger car segment underperformed the CV segment in H113, we are happy to maintain our 2013 passenger car sales growth forecast of 4.1%, to 570,000 units. Our upbeat view comes from expectations of festive month sales promotions and marketing campaigns by dealers in H213. One risk to our outlook is the recent tightening of lending restrictions by Bank Negara Malaysia, which could see auto loans taking a hit.
According to figures from the Malaysian Automotive Association (MAA), June auto sales came in at 53,631 units, down 5.3% year-on-year (y-o-y). Sales for the first six months of the year were 313,418 units, up 4.0% y-o-y.
In line with our view, vehicle sales have slowed down considerably in the past few months after their strong start to the year. One possible reason for this slowdown could have been that consumers waited to see how the ruling government, which was brought back to power in the recent May elections, would follow through on its promise of lowering car prices. Election uncertainty was a risk we highlighted back in March, which prompted us to downgrade our forecast back then ( see 'Downgrading Our Forecast Due To Election Uncertainties', March 21).
|Moderating In Line With BMI View|
|Malaysia - Domestic Auto Sales, Units (LHS); % Chg y-o-y (RHS)|
With regards to government policy, it will not be until the release of the National Automotive Policy (NAP) in H213, that we will get greater clarity on the government's strategy for the country's auto sector. Should car sticker prices fall in the coming months, it will be due to discounts provided by carmakers and not any specific government policy.
CV Segment To Face Base Effects Challenge
The commercial vehicle (CV) segment outperformed the passenger car segment for the first half of 2013, as H113 CV sales grew by 6.0%, to 37,497 units. However, we expect base effects of H212 to pose a drag on sales in the latter half of 2013, which has prompted us to downgrade our full-year CV sales growth forecast to 4.0%, to 78,587 units, from 6.0% previously.
Passenger Car Segment To Get A Boost In H213
On the other hand, we expect the passenger car segment to stage a comeback in H213 and improve on its H113 performance, when sales grew by just 3.8% y-o-y. With aggressive sales campaigns and new model offerings by dealers on the cards, we expect many consumers who have sat on the sidelines recently to jump in and make a purchase. Furthermore, the upcoming festive month sales promotions will further provide a lift to car sales. Therefore, we are happy to maintain our 2013 passenger car sales growth forecast at 4.1%, to 570,000 units.
This will then revise our total vehicle sales forecast to 4.1%, to 650,000 units, from 4.3% previously.
Risk To Outlook
A risk to our upbeat view on passenger car sales for H213 comes from the recent tougher lending restrictions imposed on banks by Bank Negara Malaysia (BNM) ( see 'Tougher Lending Rules Positive For Banking Sector Health', July 11). This could have the effect of further tightening consumer credit (which would affect auto loans) due to a more stringent loan approval process. That said, our conservative car sales growth forecast does provide some margin for such a scenario.