Malaysia Autos Report Q3 2012

In the first quarter of 2012, Malaysian new vehicle sales were down by 12.5% year on year (y-o-y), at 138,544 units, according to figures from the Malaysian Automotive Association (MAA). This was made up of 122,837 passenger cars and 15,707 commercial vehicles. New passenger car sales have been faring worse than those of commercial vehicles over the first quarter, with March figures showing a 16.6% annual fall in new car sales, while commercial vehicle sales only slipped by 4.5% over the month.

The main reason behind the fall in new car sales is a tougher credit environment for Malaysian consumers, with new regulations having been introduced by Bank Negara Malaysia in January 2012 to crack down on personal debt levels within the country. In particular, this now sees car loans approved based on net income, as opposed to gross income previously, reports to The Star website. These new regulations have hit the smaller car segment particularly hard, according to the Proton Edar Dealers Association Malaysia, which has said that only 30% of loan applications were approved in January 2012.

Proton’s main rival Perodua has also seen vehicle sales fall, by 11% y-o-y during March alone, with the company’s Managing Director Datuk Aminar Rashid Salleh stating to local media that sales of the Viva MPV model have seen the worst falls, down by 19% over Q112, to just 13,000 units.

In May 2012, state news agency Bernama reported on an appeal from the Malay Vehicle Importers and Traders Association (Pejema) to the authorities to relax these new tougher loan regulations, arguing that they are now hampering sales of both imported and locally-produced cars. Pejema now expects a ‘weaker automotive industry this year’ as a result of the regulations.

Given this unconducive credit backdrop, there are clear downside risks to BMI’s current forecast of 650,518 new vehicle sales in Malaysia over the current year. However, we will wait until the release of full H112 figures to see if any alterations now need to be made to our forecasts as a result of this tougher lending environment. Certainly, there are some reasons to believe that Q212 will prove a stronger quarter for new car sales in Malaysia. A May 2012 report on The Star website quoted several local auto sector analysts as believing that a combination of new models (such as the Proton Preve), a normalisation of component supplies from Thailand following the late-2011 flooding and the local market adapting to the tougher lending conditions should see sales increase over the April-June period.

Beyond 2012, we remain largely upbeat on the longer-term outlook for the Malaysian new car sales market, targeting a 37.6% increase, to some 895,000 new vehicles being sold in the country by end-2016.

On the production side, Malaysia produced 141,959 vehicles (126,481 passenger cars + 15,478 commercial vehicles) over the first quarter of 2012. This puts the country well on track to meet BMI’s forecast of 565,239 CBUs over the current year.