Slow speed ahead for vehicle sales this year

Kenanga Investment Bank KUALA LUMPUR: New model launches and attractive promotional offers are expected to help sales of vehicles to modestly rebound following a slump last month.

However, analysts told the Nikkei Asian Review, they doubted the prospect of any sharp increase in sales volume.

“We believe the lacklustre demand would improve, led by several recent model launches,” Kenanga Investment Bank analyst Clement Chua was quoted as saying.

But, a slower-than-expected recovery in consumer sentiment could drag this year’s total industry volume to a seven-year low, he said.

Chua has cut Malaysia’s vehicle sales forecast by 8 per cent to 570,000 units, the lowest since 2009, following the release of July’s sales data.

That compares to 2015’s volume of 666,674 units reported by the Malaysian Automotive Association (MAA), and the trade group’s forecast of 580,000 units for this year, said the Nikkei report.

MAA said vehicle sales in Malaysia plunged 28 per cent year-on-year in July and was down 26 per cent compared with June.

The latest data show the year-to-date volume at 317,930 units fell 17 per cent in the same period of 2015.

The Nikkei Asian Review report quoted MIDF Amanah Investment Bank analyst Hafriz Hezry as saying July’s data suggested a weak underlying demand that went beyond typical seasonal weakness. “The magnitude of the decline in July 2016 is pretty significant,” he said.

Perodua launched its first sedan in July after dominating the market share in Malaysia with its cheap compact cars. Perodua, a unit of industrial conglomerate UMW Holdings, said the model has averaged 1,000 bookings a day since its July 16 launch.

Meanwhile, DRB-Hicom is banking on three new models to be launched by Proton Holdings in the second half of the year to help turn around its financially troubled subsidiary. The company plans to launch a sedan in August followed by an entry-level model a month later and a seven-seater vehicle in October.

“Although there is a strong pipeline of new models and abundant discounts and promotions,” UOB Kay Hian said in a note, “there is downside risk due to the subdued macroeconomic environment on the back of rising living costs, gloomy job prospects and tepid wage growth.”

Consumer confidence remains “elusive” in the second quarter of the year, said the Malaysian Institute of Economic Research.

The consumer sentiment index, compiled by the partially government-funded think tank, rose 5.6 points from a quarter earlier but remained below the “threshold level of optimism” amid growing worries over higher prices, according to the report.