According to the Malaysian Automotive Association (MAA), auto production grew 5.6% in 2013, to 601,407 units. While passenger car production registered healthy growth of 6.7%, to 543,892 units, output in the commercial vehicle (CV) segment contracted 4.1%, to 57,515 units. For 2014, we expect growth in both CV and passenger car production, and forecast overall auto production growth to come in at 4.9%, to 630,590 units.
Figures from the MAA also showed vehicle sales rising 2.3% year-on-year (y-o-y) in March 2014 to 58,919 units, bringing sales for the first three months of the year to 159,910 units, an increase of 1.4% y-o-y.
Certainly, the lacklustre start to the year is worrying. For now, we are maintaining our 2014 passenger car sales growth forecast of 4.0%, to 600,000 units, as we see low base effects providing a tailwind to the segment in the latter part of the year.
Slowdown In Construction To Weigh On CV Segment
On the other hand, the weakness in CV sales has been more pronounced than we envisaged. Sales in the segment declined 3.3% y-o-y over the Q114 period, to 17,382 units. While we expect the country's ongoing economic transformation programme (ETP) to continue providing support for CV demand ( see 'EEV Policy And ETP Will Ensure Strong 2014', January 14), one factor that could have led to the underperformance of the segment in Q114 is cooling demand in the real estate sector.
While a lot of lending has been channeled into the real estate sector in the past few years, the recent macroprudential measures put in place by the government to rein in property speculation appear to be having the desired effect of curbing speculative demand for real estate. This is corroborated by the slowdown in money supply and credit growth in recent months. This has resulted in a slowdown in the construction sector, which has contributed to weaker CV demand.
NAP And EEV
The revised National Automotive Policy (NAP) contains incentives to promote the production of...