Automotive sector faces mixed signals
PETALING JAYA: Earnings of companies in the automotive sector in the recently concluded first quarter of 2025 (1Q25) came in below expectations again, says Kenanga Research.
The research firm said earnings were weighed down by external factors and intense competition in the non-national space, where market share is fragmented for vehicles above RM100,000.
For example, it noted that Chinese carmaker Chery has started to build its 100,000 capacity unit plant in Hulu Selangor, which would further disrupt the non-national space. Meanwhile, Malaysia's second national carmaker Perodua's back-loaded production to newer models is expected to be launched in the second half of 2025.
'If the intense competition further ramps up with mass localisation of foreign brands, this may result in the market becoming even more fragmented and may weigh on the valuation for other (auto) players,' said Kenanga Research in a report.
Currently, only the Chery brand has a concrete completely knocked down or CKD localisation programme, while TQ-Wuling Bingo, an electric car under the Tan Chong Motor group, is looking to do semi knocked-down or SKD.
On automotive companies, the research firm said Tan Chong Motor Holdings Bhd's losses were within expectations, as it had anticipated the continued sales volume decline of its bread-and-butter Nissan vehicles. This is compounded by the volatile overseas operating environment, and unfavourable foreign-exchange movements and sales mix.
Over at Sime Darby Bhd , its core net profit plunged 11% for the nine months of financial year 2025, dragged by weaker sales and margins for both industrial and automotive segments which overshadowed the robust consolidation of UMW Holdings Bhd 's earnings.
As for DRB-Hicom Bhd , core net profit plunged largely due to worsening auto sales and margins, wider sequential quarter losses at its postal and property segments, plus lower profit recognition under the group's banking segment.
Touching on Bermaz Auto Bhd (BAuto), it said the company's core net profit halved as vehicles sales volume plummeted on lower margins, which was partially offset by maiden sales of Xpeng vehicles.
'Margins may also face compression risk assuming the yen strengthens amid a hawkish Bank of Japan stance,' Kenanga Research said, adding that the re-rating catalyst for the stock would be the local assembly of the Xpeng and Deepal brands of electric vehicles boosting volume and margins.
For 2025, Kenanga Research envisions a 'two-speed automotive market' where it will be business as usual for the affordable segment.
'Our 2025 total industry volume (TIV) forecast of 805,000 units will be driven by the forward buying interest on the deferment of new excise duty regulations to end-2025. We expect Perodua to benefit the most at 44% TIV market share with the highest localisation rate as well as attractive new launches.'
With the downgrade in its sector heavyweights such as Sime Darby and DRB-Hicom, it downgrades the auto sector rating to 'neutral' from 'overweight'.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
BusinessToday
an hour ago
- BusinessToday
Malaysians Need To Earn Average RM4000 To Introduce GST, Says Anwar
Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim said the reintroduction of the Goods and Services Tax (GST) remains unsuitable for now, citing the rakyat's low income threshold as a key concern. Speaking during the Finance Ministry's monthly assembly, Anwar explained that although GST is recognised as an efficient and transparent taxation mechanism, it imposes a comprehensive financial burden — particularly on low-income earners. 'We postponed (GST) because the income of the people was still too low. My opinion at the time was that people with an income of RM2,000 were still affected although we gave some exemptions,' he said. He highlighted how even though basic necessities such as sugar and rice may be exempt, GST still applies indirectly when people purchase other goods or use public transport. 'It is comprehensive,' he noted. The government, according to Anwar, would only revisit GST implementation when the average household income reaches a more reasonable level — at least RM4,000 a month. 'Let the people's income increase first… maybe at that time we can (implement it). Right now, there are people earning RM1,700 or RM2,000,' he said. For now, the government is focused on a more targeted Sales and Service Tax (SST) system. He said tax revenue collected through SST will be channelled into core public sectors such as education and healthcare. 'The allocation for the Ministry of Education from RM58 billion in 2024 has increased to RM64 billion this year. Similarly, for the Ministry of Health, RM41 billion last year… we are adding RM4 billion to make it RM45 billion,' Anwar said. GST was introduced on Apr 1, 2015, with a standard rate of 6%, but was later repealed on Sept 1, 2018, following widespread criticism over its impact on consumers, particularly those from lower income brackets. It was replaced with the SST system. On 9 June, the government announced a targeted review of the Sales Tax rate and an expanded scope for the Service Tax, effective 1 July, aimed at strengthening Malaysia's fiscal position by increasing revenue while protecting essential goods from new taxes. Stressing the importance of macroeconomic balance, Anwar also acknowledged a gap in policy communication. He urged government members to better explain ongoing fisc Related
New Straits Times
2 hours ago
- New Straits Times
Retiree loses RM733,300 in online investment scam
GEORGE TOWN: A retired factory worker lost a staggering RM733,300 after falling victim to an online investment scam involving a mobile application known as Falcon PE. The southwest district police headquarters' Commercial Crime Investigation Department received a report from the 66-year-old man on Wednesday. State police chief Datuk Hamzah Ahmad said, based on his report, the scam began in early March, when the victim received a text message from a woman claiming to represent a supposed investment firm, Blue Star AMG. He said the woman promised the victim rapid returns of 10 per cent to 15 per cent within just 20 minutes for any investment made through the Falcon PE app. "Enticed by the high returns, the victim followed the instructions to download the app, register as a user, and begin investing. "Between March 7 and April 24, the victim made 25 money transfers to three different bank accounts, believing they were part of a legitimate investment process. "The scam only became clear when the victim attempted to withdraw profits and was told to make additional payments before the funds could be released," he said in a statement today. Hamzah said, realising he had been scammed, the victim then filed a police report on June 18. The case is being investigated under Section 420 of the Penal Code for cheating. He urged the public to remain vigilant and skeptical of investment schemes promoted online, particularly those promising unusually high or quick returns. The latest incident came less than 48 hours after it was reported that a 47-year-old interior designer lost RM794,000 after being deceived by an online investment scheme known as 'CSECDT,' which was advertised on Facebook.
The Star
2 hours ago
- The Star
Vietnam's top leader plans US trip as tariff deadline looms
HANOI: Vietnam's Communist Party chief To Lam (pic) is preparing to travel to the US in coming weeks as the two sides look to clinch a trade deal before President Donald Trump's higher tariffs kick in, according to people familiar with the matter. Lam aims to meet Trump to help finalise an agreement, the people said, asking not to be identified as the trip isn't finalised yet. It's unclear what date the party chief will travel, although preparations are being made for him to be there in the next few weeks, they said. He is expected to lead a delegation of Vietnamese officials and business executives, they said, as the nation looks to seal more deals to buy additional American goods to reduce its trade surplus with the US. Pham Thu Hang, a spokesperson for Vietnam's Ministry of Foreign Affairs, said she hadn't received any information about the visit when asked about it at a regular press briefing Thursday (June 19). The White House declined to comment. Negotiators are close to a framework agreement under which Vietnam is pushing for tariffs in the range of 20% to 25%, Bloomberg News previously reported. The US is demanding stricter enforcement against the transshipment of Chinese products and the removal of non-tariff barriers. The two sides held more talks in a virtual meeting on Thursday, attended by US Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer, Vietnam's trade ministry said in a statement. Trade Minister Nguyen Hong Dien told the officials Vietnam seeks "to develop practical and harmonious' rules with the US to deter fraudulent exports. He also welcomed the proposals from Lutnick and Greer "to advance the negotiation process,' according to the statement. Vietnam has engaged in weeks of intense trade diplomacy since Trump imposed a so-called reciprocal tariff rate of 46% on imports from the country. He then postponed the duties until July 9, temporarily setting a 10% import tax on trading partners to allow time for talks. In recent weeks, top officials from Vietnam have gone to the US to rally support. The agriculture minister secured US$3 billion worth of provisional deals during a tour of US states. The trade minister met with executives from Nike Inc, Gap Inc, and Walmart Inc to encourage key industry players to get behind negotiation efforts. Vietnam is a critical industrial base for these companies, which count on the nation's factories to manufacture goods ranging from T-shirts and jeans to basketball shoes. Brands raced to move manufacturing to Vietnam over the past decade as US-China tensions escalated, helping turn the country into one of the world's biggest production hubs. The nation's trade connections with China, its largest bilateral trade partner, have been a major sticking point in negotiations. During Trump's economic battle with Beijing in his first term, the manufacturing shift to Vietnam helped build the kind of massive trade surplus that has drawn the ire of the US president. - Bloomberg
