RHB Has A Neutral Call On Automotive Sector

RHB has made a “Neutral” call on the automotive sectors adding that the recovery momentum going into 2022 was marked by a setback – Jan 2022’s TIV saw a slow start post-Dec 2021’s promotional campaigns and supply chain issues due to the recent floods.

It said that despite that, bookings are picking up as we approach the end of the Sales & Services Tax (SST) exemptions.

Given the price sensitivity of consumers on large-ticket items – and the case where production is unlikely to keep up with demand for buyers to take advantage of the SST exemption, RHB believes that the likely strategy that marques will adopt is for distributors to absorb car price differences post SST exemption to manage sales, which is likely to hurt margins.

That industry players are likely to lobby for another round of extensions. It is possible for the SST reimplementation to be performed on a staggered basis, which should minimise price shocks and reduce the burden on margins, RHB said.

RHB economists expect Bank Negara Malaysia (BNM) to commence its gradual hiking cycle in 2H22, with the first hike being at 25bps. This will be followed by a 50bps hike in 2023. Assuming a base 2.75% hire purchase interest repayment rate, a 25bps hike will lead to a 1-2% increase in monthly repayments, based on its calculations

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