Auto Stats: Automotive (NEGATIVE) - Still in the doldrums

• Sharpest YoY TIV contraction. May 2016 TIV remains subdued on weak consumer sentiment, recording just 44.7k units (+6% MoM, -13% YoY). This brings 5M16 TIV to 218k units (-18% YoY), representing only 35% of our 2016 TIV forecast of 620k units (-7% YoY). The last time annual TIV saw a double-digit YoY decline was in 2006 (-11% YoY). Expect downgrades in TIV forecasts by consensus. Risk remains on the downside; maintain SELL on UMWH and TCM.
• Personal driver services - Lesser need to own a car? Since the entry of GrabCar and Uber personal driver services (PDS) back in 2012/2013, there has been a strong shift in demand from conventional taxi services to these PDS. Uber was reported to have ~60k drivers in Malaysia as at Jan 2016 and is targeting to grow its fleet to 100k drivers by end-2016. Assuming a similar fleet size for GrabCar, the combined fleet size could be up to 120k drivers, exceeding the number of registered taxis on Malaysian road (~109k as at end-1Q16). The increasing availability of PDS at competitive rates could be a dampener to car sales as it offers an alternative option to car ownership.
• Looming negativity shadows the sector. Shrinking TIV amid volatile fluctuation in MYR against USD and JPY are key factors that will blight the auto player’s economies of scale and profitability in 2016. The reported 1QCY16 auto earnings was a case in point.
• Opportunities amid adversities. Positively, the premium car segment (i.e. Mercedes Benz, BMW and VW) remained unfazed by weak consumer sentiment, recording YoY growth in 5M16 (+21%-51% YoY). Elsewhere, Cycle & Carriage Bintang (CNCB MK; Not-rated) reported a 43% YoY jump in 1Q16 earnings from stronger Mercedes Benz sales.