KUCHING: Despite the year-to-date (YTD) August total industry volume (TIV) showing an increase of five per cent y-o-y, a TIV forecast of 636,560 units is still anticipated as the growth pace is expected to be moderated in the remaining months due to the high base in the fourth quarter 2012 (4Q12) as well as the upcoming subsidy rationalisation that might dampen consumer sentiment.
Kenanga Investment Bank Bhd’s research arm (Kenanga Research) in a note, expected that the revised National Automotive Policy (NAP) will focus mainly on positioning the country as a regional production hub for hybrid vehicles and enhanced environmentally friendly vehicle (EEV).
“Our recent channel checks suggest that the revised NAP will focus mainly on positioning the country as a regional production hub for hybrid vehicles and EEV.
“We believe that more manufacturing licenses and pre-packaged customised incentives might be offered to attract the foreign original equipment manufacturers (OEMs) to shift their manufacturing capacity to Malaysia. “Should this materialised, it will benefits all the auto players in the long-term through partnerships and affiliations, which in turn can be developed into further tie-ups and collaborations. Meanwhile on the issue of expiring tax exemption for hybrid vehicles, we do not discount the possibility of exemption withdrawal for complete build up units (CBU) cars as this would be in line with the government aspiration as mentioned above,” it highlighted.
Note that Honda could continue to enjoy the first mover advantage as it is the only one with hybrid vehicle with complete knocked down (CKD) assembly operations in the country. While the new policy could also look into revising the structural issues such as the triple tax structures on cars, Kenanga Research opined that the excise duties will not be reduced given the huge contribution of income to the country.
For the upcoming Budget 2014, the research house believes that if GST is implemented, this would be rather positive to the automotive sector as goods and services tax (GST) will replace the sales tax (of 10 per cent) and thus lowering on the road (OTR) car prices marginally.
This may potentially lend strength to higher demand, in its view.
“For the upcoming Budget 2014 which is slated for October 25, we reckon that the GST issue might be addressed. We are of the view that should GST be implemented, it would be marginally positive to the automotive sector as the GST will replace the existing sales tax (of 10 per cent) which may reduce OTR prices for cars and catalysing higher demand.
“Nevertheless, this mildly positive catalyst is not compelling enough to prompt a change in our view on the sector as we believe that the positive impact could be easily offset by the recent fuel price hike and upcoming subsidies rationalisation plan,” the research house explained.
Currently, auto industry players generally reported subdued 2Q13 results, which were dragged down mainly by delayed purchases and also cancellation of bookings by customers in anticipation of lower car prices during the general election period.
Augusts’ TIV registered a drop of one per cent y-o-y or 25 per cent month-on-month (m-o-m) due to the shorter working month in August 2013 as well as the high base in July 2013. As a result, the YTD August TIV growth narrowed to five per cent y-o-y.
“We are still keeping our 2013 TIV forecast growth of 1.4 per cent y-o-y as we are expecting sales normalisation for the rest of the year due to the high base in 2H12 and the upcoming subsidies rationalisation plan that might hurt consumer sentiment. We are keeping our assumption on the sales mix of national and non-national segment at 52:48 for the full year,” Kenanga Research said.
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