New vehicle sales, or total industry volume (TIV), fell 3% month-on-month (MoM) to 67,532 units in Nov 2024 as consumers postpone car purchase to December to maximise savings during the year-end promotion. The year-to-date (YTD, up to November) TIV accounts for 91% of the full-year projection of 800,000 units, and is considered meeting analysts' expectation, according to Kenanga Investment Bank Bhd (Kenanga Research) which has awarded an OVERWEIGHT rating for the auto sector.

The month of December typically accounts for 9%-10% of TIV.

Overall, the auto industry's earnings visibility is good, backed by a booking backlog of 150,000 units.

MBM Resources Bhd and Hong Leong Industries Bhd are the sector top picks of Kenanga Research as the companies are good proxies to the affordable vehicles market and beneficiaries of fuel subsidy rationalisation programme, in addition to offering an attractive dividend yield of about 7% and 5%, respectively.

MBM has been awarded an OUTPERFORM call with a target price of RM6.80, offering a premium of 65 sen over market valuation, whereas Hong Leong Industries has also been awarded an OUTPERFORM call with a target price of RM15.50, rewarding a premium of 90 sen from market pricing.

As at 9:58am Dec 20, MBM's stock traded at RM6.15 while Hong Leong Industries' shares traded at RM14.60. (Stock updates from Bursa Malaysia)

MBM is favoured for its strong earnings visibility backed by an order backlog of Perodua vehicles of more than 90,000 units (almost a third of its 2024 target sales of 350,000 units) and being the largest dealer of Perodua vehicles in Malaysia with 23% stake in Perusahaan Otomobil Kedua Sdn Bhd, the producer of Perodua vehicles. Analysts expect MBMR to benefit from ew launches planned for Perodua (usually new models fetch higher margins), expansion of its dealership offerings through the Jaecoo brand and downtrading trend by mid-market buyers could drive a better demand for its affordable the Perodua and value-for-money Jaecoo brands.

Hong Leong Industries, on the other hand, is favoured given the critical role of two-wheeler motorbikes in executing online delivery transactions, the company's association with Yamaha motorcycle in Malaysia as the brand's market leader in the local motorcycle segment, and lastly, its strong cash position counting a net cash of RM1.9 billion which could be deployed for earnings-accretive acquisitions. Kenanga Research anticipates robust demand reaching record year of 680,000 units (+11%) in 2025, with Yamaha holding the lion's share of 50% as its target customers, i.e. the B40 & M40, will be spared the impact of the impending fuel subsidy rationalisation. RON95 is expected to be priced based on a two-tier system in June 2025 whereby the T15 group will be confined to unsubsidised pricing.

Below is a detailed breakdown of the passenger vehicle segment in Nov 2024 at 62,425 units (-3% MoM, -6% YoY):
Honda's (+13% MoM, -15% YoY) sales were driven by the City, Civic and all-new HR-V. Based on sales projection, Honda currently has 10,000 backlogged orders (2−4 months). Competition-wise, Honda's top variants i.e. the HR-V and CR-V are also seen to be losing market share to the newcomer, Chery.

Nissan (+7% MoM, -35% YoY) is still losing out in the all-new vehicles race and mainly dependent on its massive rebates to stay in competition. Currently, Nissan depends on the face-lifted Nissan Serena S-Hybrid, Navara, and Almera Turbo with 1,000 backlogged orders (1−2 months).

Both Honda and Nissan have attractive year-end discount promotion which set it apart from other automakers in November.

Proton's (-5% MoM, -2% YoY) sales were mainly driven by the all-new X70, X50 and X90 (3,187 SUV units sold, making up 27% of sales), and supported by the all-new S70, as well as the face-lifted Persona, Iriz, Exora and Saga (collectively known as PIES). Based on sales projection, Proton currently has 20,000 backlogged orders (up to 12 months for the X50 and by five months for other models). Proton launched its most anticipated first EV of Malaysia, Proton e.MAS 7 on 16 December 2024.

Perodua's (-6% MoM, -1% YoY) sales continued to be propelled by the all-new Perodua Alza and all-new Perodua Axia, with equally strong sales of the Bezza, MyVi, and Ativa models. Based on sales projection, Perodua currently has 90,000 backlogged orders (up to 6 months for the Axia, Alza and Bezza, and up to 2 months for the Ativa/Myvi models).

Toyota's (-8% MoM, -19% YoY) sales were driven by its popular top models, namely the all-new Vios, Yaris, Corolla Cross and Hilux. Based on sales projection, Toyota currently has 20,000 backlogged orders (3−6 months).

Mazda (-22% MoM, -49% YoY) was driven by the Mazda CX-30, the CX-5 and CX-8. Mazda CX-5 and CX-8 are considered as the older generation and will be replaced with the newer generation CX-60 and CX-90 in CY2025. Based on sales projection, Mazda currently has 1,000 backlogged orders (1−3 months). Competition-wise, Mazda is seen to be losing market share to newcomer, Chery (its YTD 2024 sales at 16,656 units have surpassed Mazda's 13,437 units).

The implementation of e-invoicing is having lesser impact to car sales than previously anticipated. Automakers are racing to provide discounts and rebates to ensure sustained demand, and lessen the impact of e-invoicing on consumer sentiment. E-invoicing essentially will cease the common practice of providing 100% hire purchase financing, circumventing the Hire Purchase Act 1967 whereby customers are required to make a minimum down payment of 10%.

Vehicle sales will also be supported by new Battery-powered Electric Vehicles (BEV) that enjoy SST (Sales & Services Tax) exemption and other EV facilities incentives up until 2025 for CBU (Completely Built Unit) and 2027 for CKD (Completely Knocked Down). The new registration for BEVs leapt from 274 units in 2021 to over 3,400 units in 2022, 10,159 units in 2023, and almost 16,000 units for the first nine months of 2024 (based on the Ministry of Transport's press release), or 3% of TIV.

Analysts expect more favourable incentives from the government which has set a national target for EVs and hybrid vehicles to account for 15% of TIV by 2030 and 38% by 2040. Meanwhile, the government will speed up the approval for charging stations. The number of proposed charging stations currently stands at 4,225 (3,354 built to date) should more than double to 10,000 by end-2025.