KUALA LUMPUR: Malaysia's automotive sector total industry volume (TIV) is expected to normalise downwards to 720,000 units level units this year, according to Hong Leong Investment Bank Bhd (HLIB).
HLIB said the TIV started healthy at 65,500 units in Jan 24 mainly driven by existing order backlogs, improved supply chains, attractive new model launches and continued strong demand.
"However, TIV is seen to normalise after achieving a new record high of 799.6k units in 2023, mainly due to declining order backlogs and easing new order intakes over the coming months," it said in a note.
Nevertheless, HLIB said there is still upside potential from exciting new model launches in late-2023 and in 2024; and more aggressive sales as well as marketing activities to sustain sales by the various original equipment manufacturers (OEM).
"Government has also set 2025 as the target for national OEMs to introduce new affordable electric vehicle (EV) models," it said.
While the current order backlogs will sustain TIV numbers into the first quarter (Q1) 2024, HLIB said this is expected to soften in subsequent quarters before recovering by year end.
It expects earnings for the sector to drop in 2024 due to lower sales volume and higher operating costs.
"We maintain our Neutral call on the automotive sector with top picks: DRB Hicom Bhd and MBM Resources Bhd for their strong leverage onto the national OEMs."This includes Proton and Perodua, which has more sustainable sales volume and potential export growth in the longer term," it added.