Analysts Hold Mixed Views on Malaysia’s Automotive Sector

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Despite the Malaysian Automotive Association (MAA) upgraded Malaysia’s full-year total industry volume (TIV) forecast for 2023, analysts on Monday held mixed views on the country’s automotive sector.

Affin Hwang Investment Bank said in a note that it maintained Malaysia’s 2023 TIV of 575,000 units, which fell 20.1 percent year on year, due to brought forward car purchases during the tax exemption period and higher loan repayment rates with the revised overnight policy rate (OPR) of three percent.

Despite the expected strong TIV for the year, Hong Leong Investment Bank Research still maintained its neutral views on the sector, as it expects TIV to drop after fulfilling the current huge backlog orders of 300,000 units.

The research house, however, is maintaining Malaysia’s TIV expectation of 700,000 units for 2023 (-2.9 percent year on year), as it anticipated continued strong deliveries backed by the high industry order backlogs and attractive new model launches.

AmInvestment Bank, on the other hand, said that it anticipated continued strong sales of motor vehicles in Malaysia throughout 2023 even though the sales tax-free window has already expired.

“Our optimism is driven by several factors, including robust order backlogs, healthy bookings and upcoming new product launches,” said the research house.

Kenanga Research also believes a new car is still an affordable luxury for most Malaysian households despite the high inflation and a slowing global economy.

The research house has maintained Malaysia’s 2023 TIV projection of 720,000 units which will match the record level achieved in 2022.

Last week, MAA revised Malaysia’s 2023 TIV forecast to 725,000 units from the previous projection of 650,000 units.

The revision was underpinned by Malaysia’s stable economic outlook, sustainability of the market performance, new car models, automakers’ promotional strategies, further improvement in the automotive industry supply chain environment, and the maintenance of OPR in the country.

It is noted that for the first half, Malaysia’s TIV rose 10.3 percent to 366,037 units from 331,746 units a year ago.

The total industry production (TIP) of new vehicles in the first half also increased by 14 percent to reach a total of 362,535 units as compared to 317,933 units a year ago.

The increase in production volume was in tandem with the higher overall sales in the first half.

As for June, Malaysia’s car sales slipped 2 percent year on year to 62,569 units from 63,631 units a year ago, while car production declined by 3 percent to 58,051 units from 59,885 units.

MAA expects vehicle sales in July to be maintained at June level.

Meanwhile, some analysts see the entry of American multinational electric automotive manufacturer Tesla into Malaysia to lead to structural change in the industry.

“Tesla’s entry into Malaysia has marked a successful debut supported by Peneraju’s Global Battery Electric Vehicle (BEV) program, featuring a competitive price range for its Model Y, with prices starting from 199,000 ringgit (43,521 U.S. dollars), which will be disruptive in the local automotive market, in our view,” said Affin Hwang.

Unlike the other electric vehicle (EV) brands, it said Tesla’s ability to price the Model Y competitively is likely due to little concerns over cannibalizing its existing product lineup.

Despite the EV segment’s minimal contribution, the research house anticipated a slowdown in EV sales for Malaysian automakers due to competitive pricing from pure EV players, and possibly leading to price cuts in response to Tesla’s offerings.

Kenanga Research, on the other hand, did not expect the entry of Tesla to pose a meaningful threat to the local automotive industry over the immediate term, as more than 70 percent of vehicles sold locally carry a price tag of less than 100,000 ringgit.

The research house also foresees Tesla’s presence in Malaysia, increasing the participation of local companies in the Tesla ecosystem, both domestically and globally.

However, it believes the challenges faced in ramping up charging hubs could be a hindrance for potential buyers of electric vehicles looking for out-of-town long drives.

According to Kenanga, there are only about 1,000 charging stations available at present, compared to Malaysia’s Ministry of International Trade and Industry (MITI) expectation of 4,000 charging points by the end of this year.

Under the Low Carbon Mobility Blueprint 2021−2030, the Malaysian government aims to install 10,000 public charging stations by 2025 (1,000 DC chargers, 9,000 AC chargers). (1 ringgit equals 0.22 U.S. dollar)