Analysts believe that the new volume-driven launches (Perodua ATIVA, Proton X50, Honda City and Nissan Almera) could help spur sales along with the overflowing back-logged bookings and the extension of SST exemption, seasonal promotions and more new launches expected in 2H21. — Bernama photo
KUCHING: New volume-driven launches and the extension of the services and sales tax (SST) are expected to spur the automotive sector’s growth, analysts observed.
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) said: “We believe the new volume-driven launches (Perodua ATIVA, Proton X50, Honda City and Nissan Almera) could help spur sales along with the overflowing back-logged bookings and further boosted by the extension of SST exemption to June 30, 2021, seasonal promotions and more new launches expected in the second half (2H) of the year.”
It added, “Overall, 2021 could potentially be a better year along with better incentives program under NAP 2020, positive impact from Bank Negara Malaysia’s overnight policy rate (OPR) cut and pre-emptive measures that soften the Covid-19 impact.”
Despite its optimism, Kenanga Research said consumer sentiment’s recovery on hold due to prolonged MCO.
“The Malaysian Institute of Economic Research’s (MIER) posted 85.2 points (down 6.3 percentage points quarter-on-quarter, up 2.9ppt year-on-year) for its 4Q20 Consumer Sentiment Index (CSI). After three quarters of recovery, the CSI fell which we believe was due to the prolonged MCO which affected financial and job confidence with year-end shopping plans taking a breather as consumer held back purchases in preparation for MCO 2.0 in January 2021.
“Nonetheless, this was cushioned by various government assistances under PENJANA and KITA PRIHATIN, particularly exemption in sales tax for passenger vehicles (mid-June 2020 to June 30, 2021) and extended loan moratorium for financially distressed individuals.
“The CSI is still below the optimistic threshold (more than 100pts) as consumers are still observing cautious spending patterns especially on high-value discretionary items (such as vehicles, imported goods and travelling), coupled with stores’ limited operating time (under RMCO) and still-closed international borders,” it said.
It noted that passenger vehicles loan approval rate remains unexciting at 60.8 per cent as of January 2021, but charting a positive recovery from the lowest of 31 per cent in April 2020 during the enhanced MCO.
“This is due to stringent loan approval on employment criteria for several economic sectors that still see high risk impact from Covid-19 restriction such as the aviation sector,” it added.
Overall, it said, all automotive players under its coverage recorded significant increase in profit buoyed by sales tax exemption and tremendous production level contribution from associates, especially Perodua with full-capacity stretched to meet backlogged demand.
“Looking forward to 1Q21, we expect most of the auto players to chart a slower drive with sales growth coming off from a higher 4Q21 base on pre-emptive buying driven by exciting year-end promotional campaign, sluggish showroom activity from MCO 2.0, and shortage of components and parts for some players especially during the temporary closure of automotive factories in the 1st week of MCO 2.0 that began January 13.
“Nevertheless, all new model launches in March 2021 especially the highly anticipated all-new Perodua ATIVA (13,000 units outstanding bookings) should cushion the negative impacts,” it said.
Kenanga Research maintained its ‘overweight’ rating on the sector.
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