The automotive sector's 2Q24 performance largely aligned with forecasts, with Sime Darby (SIME), Bermaz Auto (BAUTO), and MBM Resources (MBM) meeting expectations. However, Tan Chong Motor (TCM) underperformed, with widening losses attributed to declining sales volumes. SIME reported a 14% increase in earnings, bolstered by its industrial segment and the integration of UMW's numbers. In contrast, MBM and Bauto experienced a decline in results quarter-on-quarter, which was anticipated due to the traditionally weaker 2Q24 sales. TCM's difficulties stemmed from reduced demand for its vehicle models, leading to a less favourable performance.

RHB Stock Broking House maintains a NEUTRAL stance on the sector, despite upward revisions to the 2024 Full-Year Total Industry Volume (TIV), now forecasted at 790,000 units, up from 740,000 units. This adjustment reflects expectations of a stronger 3Q24, driven by improved sales volumes from Perodua and Proton, which reported year-on-year growth of 14% and 13% respectively in July. However, TIV is anticipated to normalise in the second half of 2024, potentially showing weaker figures compared to the first half.

The auto sector faces challenges as major manufacturers, such as Perodua and Toyota, report reductions in their order backlogs. Perodua's backlog has decreased to 100,000 from 128,000 units, while Toyota's has dropped to 20,000 from 28,000 units. Despite this, Perodua's year-to-date sales growth of 17% suggests it may achieve a record high in sales volume for 2024, leading to a revised sales assumption of 345,000 units for the national carmaker.

Looking ahead, the sector is projected to face a cyclical downturn in sales volume, with a forecasted 8% year-on-year decline in the second half of the year. The anticipated impact of electric vehicles (EVs) remains limited due to high pricing and the current RM100,000 floor on Completely Built Units (CBUs). Unless more affordable locally assembled EVs are introduced or the price floor is lifted by the end of 2025, the effect on TIV is expected to be minimal.