Carmakers to step up their game as competition heightens

Despite a more conservative outlook, new launches in 2019, particularly in the mass market, are likely to boost volume


2018 was a relatively good year for the automotive sector, despite the challenges and uncertainties that shrouded the industry.

Sales surged by 32% year-on-year (YoY) to 198,518 units or almost 48,000 more during the three-month tax holiday — which had uplifted the total industry volume (TIV) towards 585,000, as projected by the Malaysian Automotive Association (MAA).

While MAA has yet to release the full-year deliveries in 2018, analysts are largely optimistic that the figure will cross the initial projection of 585,000.

JF Apex Securities Bhd research analyst Nursuhaiza Hashim has projected the 2018 TIV will hit 588,100 units and TA Securities Holdings Bhd analyst Abel Goon has predicted a slightly higher figure at 589,000 units.

Affin Hwang Investment Bank Bhd analyst Brian Yeoh expects the TIV to be right on the 600,000 level.

Hong Leong Investment Bank Bhd analysts Daniel Wong and Muhammad Fazli Akmal Zamri were more optimistic that the TIV would cross the 600,000 mark and settle down at 602,600 units, according to the research house’s 2019 Outlook Report.

Analysts’ consensus was clear — 2018 was expected to record a growth rate of between 2% and 4% YoY from 576,635 units registered in 2017.

2019 TIV

The industry is expected to remain challenging with traditional risks. The tightening of hire-purchase loans, rising cost of living and greater adoption of public transportation will continue to assert pressure on the growth of the sector.

Competition among carmakers is getting tougher with every brand upping their game to compete in what many see as a limited market.

A double-digit growth would be a thing of the past for a market that has already matured.

Despite the more conservative outlook, new launches in 2019 — particularly in the mass market — are expected to boost volume. Perusahaan Otomobil Kedua Sdn Bhd’s (Perodua) first SUV, UMW Toyota Motor Sdn Bhd’s new Vios and Yaris, and other facelift models by other brands are expected to inject some excitement into the market.

Goon forecast 2019’s TIV to be at 598,000 units, Nursuhaiza with 600,500 units, while Yeoh has a 603,000 estimate — those numbers represent a growth of 1%-2% against their respective 2018 TIV projections.

But some quarters were more conservative for 2019.

Given the high base in 2018, analysts and industry observers viewed that it would not be an easy task to match such a growth rate in 2019.

Wong and Muhammad Fazli have projected the TIV to drop by 1% YoY to 596,600 against 2018’s estimate of 602,600 units.

Leading premium carmaker Mercedes-Benz Malaysia Sdn Bhd (MBM) also anticipates a decline in passenger car volume.

MBM sales and marketing of passenger cars VP Mark Raine said the passenger vehicle segment could hit between 535,000 and 540,000 units in 2018.

He said the figure could drop by as much as 20,000 units, or 4% lower in 2019, to between 510,000 and 515,000 cars.

“The market will remain challenging possibly until the first half of 2019. There will be a pull forward effect from the tax-free period and manufacturers had been very aggressive in efforts to increase sales in the fourth quarter of 2018 (4Q18),” Raine told The Malaysian Reserve (TMR).

Raine said the premium segment would be able to hold its 2018 level at around 27,000 units of passenger cars in 2019.

It seems like 2019 is going to be another testing year for automotive players, but the industry stands a chance to deliver a bigger volume on exciting new models.

National Carmakers Contest SUV Market

Perodua is expected to launch its first SUV this year, following the steps of its close rival Proton Holdings Bhd.

Perodua has been drip-feeding information on the new SUV to build anticipation, a similar strategy adopted by Proton for the X70.

Seven seats with flexible configuration, advanced Safety Assist 2.0, six airbags and a dual VVT-i 1.5-litre engine delivering 15.6km/litre fuel efficiency — these are the details that Perodua has revealed so far.

The new SUV is set to go head to head with Proton’s X70 which was launched on Dec 12, 2018, and aims to disrupt the status quo of the SUV market in the country.

The two national carmakers are indeed venturing into a new segment with the SUV models, which will take the fight to other players like Honda Malaysia Sdn Bhd with its CR-V, HR-V and Toyota with its CH-R.

Bermaz Auto Bhd is also expected to launch at least two new SUVs — the Mazda CX-8 and CX-3.

“2019 will be exciting and challenging. The X70 is not just a new product for Proton, but it represents new competitive and attractive features that will be introduced into Proton’s future cars,” Proton Edar Sdn Bhd CEO Abdul Rashid Musa told TMR.

Yeoh said in a 2019 outlook report that the national carmakers’ market share may gain traction in the near term, given that both companies are racing to launch their respective SUV models in 1Q19.

NAP 2019 — a Game Changer

Every stakeholder is anxious about the upcoming National Automotive Policy (NAP) 2019. The new policy is said to be a game changer for the industry. It is set to be launched in 1Q19.

It charts the vision for electric vehicles, connected mobility and new technologies, among others.

Malaysia Automotive, Robotics and IoT Institute CEO Datuk Madani Sahari said the new policy entails three cores — namely next-gene-ration vehicles, mobility asset services and the Industry 4.0.

The NAP2019 is expected to provide the next strategy for the country’s energy-efficient vehicle (EEV) programme, which also includes provisions on electric cars.

It is anyone’s guess on whether the EEV programme will be overhauled or simply enhanced to close any existing loopholes.

The debate on localisation is also ongoing and the matter requires a balanced approach to encourage more locally value-added content in local carmaking, while attracting foreign carmakers to further invest in the country’s manufacturing scene.

Additionally, the end-of-life vehicle policy remains a long-standing issue in the industry that’s yet to be introduced, although it is crucial to finally complete the automotive ecosystem in the country.

The NAP2019’s aspirations also provide the guiding principles for Malaysia’s third national car development.

Economic Affairs Minister Datuk Seri Mohamed Azmin Ali said a prototype car could be introduced in 2019.

Entrepreneur Development Minister Datuk Seri Mohd Redzuan Md Yusof said Putrajaya is committed to providing quite a “large” sum of grants for research and development of the prototype.

The new national car could be the impetus of a new era for Malaysia’s automotive scene.

The third national car is envisioned to catapult Malaysia’s engineering and manufacturing capability to the next level as the country moves to become a high-income nation.

Suffice to say, 2019 will be an electrifying year for the automotive sector.

New launches, new policy and new leadership at major carmakers will blow new spirit to Malaysia’s automotive scene.

It is a new Malaysia after all, and everyone is rising up to the challenge!