Kenanga has raised its CY24 TIV projection by 4% to 740k units (from 710k units), bringing it in-line with the forecast of Malaysia Automotive Association (MAA).
The house believes that the boatload of new EV launches and the recent cut on EV road tax will help to spur the demand for electric vehicles. Recall that, current EV line-ups are all imported that have RM100k regulated floor price as well as units limitation distributed per month. On the other hand, we believe while it will be business as usual for the affordable segment, fuel subsidy rationalisation is more likely to hurt the demand for mid-market models (alternatively they can opt for EV to
cut their fuel bills), giving rise to a two-speed automotive market locally in CY24.
The house expects a new car is still an affordable luxury for most Malaysian households despite the high inflation and a slowing global economy underpinned by: (i) strong consumer confidence supported by a stable economy and a healthy job market, (ii) the affordability of motor vehicle underpinned by stable new car prices thanks to the deferment of new excise duty regulations (that could have resulted in prices of locally assembled vehicles increasing by 8%−20%) and potentially cheaper hire purchase cost with the introduction of the reducing balance method in the calculation of interest charges, and (iii) attractive new models.
Kenanga said it believes be business as usual for the affordable segment as its target customers, i.e. the B40 group, will be spared the impact of the impending fuel subsidy rationalisation and also could potentially benefit from the introduction of the progressive wage model. However, the same cannot be said for the mid-market segment as its target customers, i.e. the M40 group may hold back from buying a new car (or even down trade to a smaller car or switching to electric vehicles to cut their fuel bills) upon the introduction of fuel subsidy rationalisation. In general, the industry’s earnings visibility is still good, backed by a booking backlog of 200k units as at end-May 2024.
More than half of the backlog is made up of new models, alluding to how appealing new models are to car buyers. This trend is likely to persist throughout CY24 given a strong line-up of new launches. Vehicle sales will be supported by new BEVs that enjoy SST exemption and other EV facilities incentives up to CY25 for CBU and CY27 for CKD.
BEV new registrations have leapt from 274 units in CY21 to over 3,400 units in CY22 and 10,159 units in CY23, with 2,703 units for YTD April 2024 and are on track to meet national target for EVs and hybrid vehicles of 15% of total industry volume (TIV) by CY30, and 38% of TIV by CY40. Meanwhile, the government’s pledge to enable charge point operators (CPOs) to secure faster approvals for installation provides comfort as currently only 3,951 EV charging stations have been built to-date.
