PETALING JAYA – Hong Leong Investment Bank (HLIB) Research expects the automotive industry to continue to weaken in 2017, due to continued weak consumer sentiments as well as the weakening of the ringgit, which has had an impact on cost structures and margins.

In a report yesterday, its analyst Daniel Wong said the tight bank lending requirements have also affected sales volume.

Nevertheless, Wong said the research house expects the national original equipment manufacturers (OEMs) to sustain their sales volume next year.

Last week, the Malaysian Automotive Association reported that Malaysian automotive sales fell 14.17% to 47,879 units last month, from 55,788 units in the previous year’s corresponding period, reflecting subdued consumer sentiment on the weakened ringgit and the government’s subsidy rationalisation exercises.

However, Wong said the total industry volume (TIV) is expected to improve in the last two months of the year (November and December), as original equipment manufacturers have launched aggressive sales campaigns to boost year-end sales volume in order to achieve targets and clear existing inventories.

In October, Perusahaan Otomobil Kedua Sdn Bhd (Perodua) reported weaker sales of 16,100 units (less 6.7% year-on-year), which was mainly affected by new launches by Proton Holdings Bhd.

However, Wong said the recent aggressive sales campaigns for MyVi and Alza are expected to push Perodua’s year-end sales and achieve its target of 216,000 sales.

Year-to-date, Perodua registered 167,000 sales (less 4.5% year-on-year).

Meanwhile, Wong said, Proton sales improved month-on-month to 7,600 units (less 4.8% year-on-year) on new contribution of Persona and Saga.

However, he said new model sales seemed to be lower than monthly expectations of 8,000 to 10,000 units, while new model MPV Ertiqa has been delayed, suggesting and urgency to execute its restructuring plan.

Honda Malaysia sustained sales at 8,200 units (less 3.5% year-on-year), after launch of aggressive sales campaigns with discounts of up to RM7,000.

Wong said Honda, which previewed new models BRV and Jazz hybrid recently, could bring in new models into the Malaysia market in 2017.

Toyota sales remained weak at 5,500 units (less 38.9% year-on-year), dragged by on-going weak consumer sentiment and stiff competition, while Nissan sales plunged to 2,500 units (less 14.8% year-on-year), which is its lowest monthly sales since 2012.

Toyota recently launched aggressive sales campaigns with discounts up to RM10,000, in order to boost year-end sales volume.

Given lack of new models for 2016-17, Wong said, Nissan will continue to rely on aggressive marketing to boost its sales volume. “Other marques recorded combined sales of 7,800 units (less 14.6% year-on-year), led by Isuzu (DRB-Hicom), Mazda (Berjaya Auto) and Mercedes (DRB Hicom & C&C).”

HLIB Research is maintaining its underweight call on the automotive sector, with MBM Resources Bhd as its top pick, with a target price of RM3.08.