Automotive sector to strengthen in near-term: Research firms

Kuala Lumpur: MIDF Research expects automotive demand to strengthen in the near-term, on the back of the tax holiday which runs till year-end, coupled with the reopening of showrooms nationwide.

Vehicle manufacturing has been allowed to resume since mid-August, although operating capacity is subject to the percentage of fully vaccinated workers.

“We also expect total industry volume (TIV) to rebound by double-digits in 2022, assuming no further disruptions,” it said in a research note Thursday.

It said the TIV for the financial year (FY) 2021 had been revised down to 509,951 units from 550,000 units previously – a 3.7 per cent year-on-year (y-o-y) contraction – following the downward revisions throughout the recent result season to factor in production shortfalls caused by the 2.5-month lockdown.

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However, the research house said bookings remain robust as players were sitting on two to four months of outstanding orders prior to the lockdown.

As such, MIDF Research has maintained its ‘positive’ call for the automotive sector as demand remains intact at this juncture, backed by strong outstanding orders.

“The simultaneous reopening of auto retailing should accommodate further build-up of outstanding bookings in our opinion, underpinned by the tax holiday, cash transfers under the fiscal stimulus programmes and a low-interest-rate environment,” it said.

The research house also expects much stronger TIV numbers in September 2021, which would reflect a full month resumption of both manufacturing and sales operations.

It noted that the August TIV was down by 4.4 per cent y-o-y at 273,757 units.

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Meanwhile, RHB Research has maintained its 2021 TIV forecast of 500,000 units, premised on the assumption that sales for September till December could be at 90 per cent to 95 per cent of the monthly sales of FY20, supported by the last leg of the sales and service tax exemption.

“We expect September’s TIV to see a healthy recovery, with auto manufacturers ramping up production to cater for on-hand bookings,” it added.

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