Automotive sector

HLIB and RHB remain “neutral” on the automotive sector

KUALA LUMPUR: The auto industry is set to receive continued sales support from the extension of the Sales and Services Tax (SST) exemption until June 30, 2022, although the rest of the year could be difficult.

In its sector update, Hong Leong Investment Bank (HLIB) Research said that although sales will increase in 1H2022, it expects sales in the second half to be weak as consumers would have advanced their purchases in the first half. .

“We expect car sales to remain strong in 1H22, averaging 60-65,000 units per month. However, after the SST waiver period, car sales are expected to drop to 35-40,000 units on average in 2H22,” he said.

HLIB has an expected total industry volume of 600,000 units in 2022.

Separately, RHB Research has a lower TIV forecast of 540,000 units.

The research firm also believes that the SST exemption until June 30 will keep demand buoyant, particularly given the low interest rate environment, but added that the incentive will not be as effective as previously.

“This is because consumers intending to take advantage of the discount would have already done so within the last 18 months.

“Beyond that, we expect TIV to decline for a few quarters after the reimposition of the SST, before resuming growth,” it said in a report.

Meanwhile, 2022 has been touted as an exciting year for electric vehicles (EVs) given the government’s duty and OHS exemption.

RHB said the exemptions would reduce the price of electric vehicles, but noted that battery electric vehicles would still be more expensive than typical internal combustion engine models and would not appeal to the majority of car buyers.

RHB and HLIB said charging infrastructure in public spaces remains a concern.

“Mass adoption of the BEV will take longer to materialize due to the overwhelming concern over the availability and efficiency of charging infrastructure and the unavailability of inexpensive entry-level BEVs,” said declared HLIB.

The two research firms maintained their “neutral” rating on the automotive sector.

The best choices for HLIB are DRB (TP: RM2.30), MBMR (TP: RM4.80), Sime Darby (TP: RM2.68) and Bermaz Auto (TP: RM.1.80) while RHB’s top pick is Bermaz Auto (TP: RM1.71).