The Malaysian automotive sector has shown notable improvements in July, with the Total Industry Volume (TIV) reaching 71,730 units, marking a 23.5% month-on-month increase and an 11% year-on-year rise. The production volume (TPV) also surged to 70,300 units, reflecting a 41.1% month-on-month growth. This uplift follows a low base from June, which was impacted by maintenance shutdowns.

Analysts have maintained a NEUTRAL stance on the sector, with Bermaz Auto (BAUTO) being highlighted as a top pick. Despite the positive July performance, the overall outlook for the automotive sector remains cautious. Analysts expect a cyclical downturn in earnings growth for the year, influenced by a lack of substantial new high-volume model launches. The 2024 TIV forecast is kept at 740,000 units, considering the sector's current trajectory and market conditions.

For July, Proton and Perodua showed impressive month-on-month production increases of 55% and 53%, respectively. This rise is attributed to the ramp-up in production of Proton's X70, including the newly launched facelift model. In contrast, major non-national carmakers had mixed performances, with Toyota recording a 44% increase in production, while Honda saw a slight decline of 2% month-on-month.

Perodua continues to lead the market with a 43.7% share, up from 41.3% last year, indicating a possible shift in market share from Toyota. Honda has managed to retain its 10% market share with a 16% rise in sales year-to-date, driven by aggressive marketing efforts.

Proton is advancing in the electric vehicle (EV) sector with its forthcoming e.Mas 7 model, set for release in December. However, due to the current price floor for completely built-up (CBU) EVs, which is expected to remain until the end of 2025, the e.Mas 7 will likely be priced above RM100,000. This pricing strategy is anticipated to limit its immediate impact on Proton's sales, given the niche market for EVs, which constitutes just 2-3% of national car sales. Analysts suggest that while starting with CBU units is reasonable, Proton will eventually need to localise production to reduce costs and support broader EV adoption.

Source: RHB
Title: Coming From a Low Base