Friday, October 21, 2016

Our 2016 TIV forecast of 590k units is unchanged. TIV sales retraced 8% MoM in Sep to 48.2k units, affected by slower car production caused by a supply chain disruption. This brings 9M16 TIV to 418k units (-14% YoY), representing 71% of our 2016 TIV forecast of 590k units (-11% YoY). We expect recovery in Oct TIV, aided by recovery in car pro

Good morning,

Auto Stats: Automotive (NEUTRAL) - A blip in car sales
  • Our 2016 TIV forecast of 590k units is unchanged. TIV sales retraced 8% MoM in Sep to 48.2k units, affected by slower car production caused by a supply chain disruption. This brings 9M16 TIV to 418k units (-14% YoY), representing 71% of our 2016 TIV forecast of 590k units (-11% YoY). We expect recovery in Oct TIV, aided by recovery in car production and stronger deliveries of the new mass-market launches. We remain positive on those with meaningful exposure to Perodua; riding on the economical car segment amid weak consumer sentiment. Maintain BUY on Pecca, MBM and BAuto; SELL on UMWH; HOLD on TCM.
  • Better days ahead. Strong MoM growth in Proton (+37% MoM, -31% YoY) car sales was insufficient to offset the shortfall in Perodua (-19% MoM, +18% YoY) sales, leading a 0.9ppt MoM contraction in the market share of the national segment. We understand that weakness at Perodua level stemmed from a supply chain disruption due to a fire at Perodua’s insulation part supplier. Recovery in Perodua’s Sep car production (+9% MoM) should see sales recover in Oct.
  • Possible goodies from the National Budget tonight? Chatters on the possibility of excise duty reduction/exemption on CKD cars (possibly capped by engine capacity <1.5L or 2L) for first time car buyers (below a certain age) would be mildly positive for TIV should this incentive materialize. Lower car prices should be more pronounced for foreign marques which have more imported components (~50-60%; subject to excise duty) in comparison to national marques where localization of parts has exceeded the 80% level. We do not rule out alternative measures such as reduction of down payment requirement.

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