Outlook On Tan Chong Unchanged Despite GAC Vietnam Venture

Tan Chong has been appointed the exclusive distributor for GAC Motor International Co Ltd’s vehicles in Vietnam, which will help to fill the gap left by the termination of its MG vehicle distributorship in Vietnam in Jun 2023. However, Kenanga says the contributions during the initial years will be immaterial as it takes time to build the brand and volume.

The local Nissan distributor, has signed an exclusive 3-year agreement of distribution and service with GAC Motor International Co Ltd (GAC). TCHONG will import, distribute, and sell the GAC vehicles and spare parts, and to provide after-sales services for GAC vehicles in Vietnam. China-based GAC group has many models including sedan, SUV, MPV, PHEV and NEV. The group has produced and sold more than 2m vehicles from its manufacturing plants in Guangzhou, Xinjiang, Yichang
and Hangzhou. Its latest model includes the all-new GAC GS3 Emzoom.

Kenanga says it is positive as this will help to fill in the gap left by the termination of its distributorship for MG vehicles in
Vietnam in Jun 2023. However, contributions during the initial years will be immaterial as it takes time to build the brand and volume. Meanwhile, without a concrete CKD agreement to utilise its Danang plant, the house expects TCHONG to continue to record losses in Vietnam. Recall, in 9MFY23, it recorded a higher loss of RM32.4m in Vietnam (from loss of RM10.9m in

Based on the previous brands vehicles distribution agreement, TCHONG is expected to sell GAC CBU vehicles, at most 1k units, annually in Vietnam for the first year and gradually ramping up thereafter. Recall, for 3QFY23, TCHONG only sold 23 units of vehicles in Vietnam due to termination of MG vehicles distribution agreement by its principal, SAIC Motor International Co Ltd (SMIL) in June 2023. The auto market in Vietnam is quite small as compared to Malaysia due to its unstable pricing policy and lower purchasing power. Automakers under the Vietnam Automobile Manufacturers’ Association (VAMA) sold just over 300k units in 2023 (-25% YoY) vs. Malaysia’s at 799k units (+11%).

The house also maintains its TP of RM0.75, Kenanga remains cautious on TCHONG due to its insignificant 1% share of the total industry volume, (ii) its lack of new launches while its competitors have successfully launched all-new models, and (iii) its inability to raise prices to pass on rising production cost, especially with the weakening of MYR against USD.

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