Premium carmakers dented over shift in demand

C&C notices a shift in demand to the lower-priced segment which has hit its sales


THE premium auto segment may be facing headwinds from weaker demand and shift in buyer preference for cheaper makes.

Premium automakers may have underestimated consumers’ buying power as sales volume in the past nine months this year (9M19) showed.

Luxury car brands sales in 9M19 declined by 21% year-on-year (YoY) with BMW AG/MINI falling 17% and Mercedes-Benz falling by 26%, according to Affin Hwang Investment Bank Bhd analyst Brian Yeoh and the Malaysian Automotive Association.

Cycle and Carriage Bintang Bhd (C&C), a major Mercedes dealer, stated that it has noticed a shift in demand to the lower-priced segment which has hit its sales.

“Unit sales decreased by 33%, alongside reduced margins, due to a shift in sales mix to lower-priced models and weak consumer demand, which led to a decline in the premium luxury segment,” the group said last week in announcing its third-quarter results (3Q19).

C&C slipped into a fourth straight quarterly loss of RM12.2 million in 3Q19, compared to a net profit of RM3.51 million in the same quarter last year due to market conditions.

Vehicle unit sales dropped by 33% due to a decline in the premium luxury segment, but aftersales recorded a throughput growth of 11%.

Retail margins were impacted by intensifying competition and model mix changes, the company said in its Bursa Malaysia filing recently.

Following a business review, C&C has decided not to proceed with the planned construction of a 3S (sales, service and spare parts) centre on the plot of Sungai Besi land purchased previously.

In another report, Yeoh said C&C’s profitability will remain under pressure due to sluggish consumer demand and the margin squeeze sustaining into the coming quarters.

Mercedes-Benz Malaysia Sdn Bhd sales and marketing passenger cars VP Michael Jopp told The Malaysian Reserve (TMR) recently the German carmaker expects sales for the year to be lower than last year, attributable to a change

in local customer behaviour due to global economic uncertainties and partly due to the tax holiday impact from last year.

TMR reported that Volvo Car Malaysia Sdn Bhd MD Nalin Jain said the local automotive market is “very tough” now due to global uncertainties and partly because of the absence of tax holiday implemented last year.

Unlike Mercedes and BMW, Volvo, however, recorded a 29.4% YoY growth in sales for the 9M19 to 1,374 cars from 1,062 in the corresponding period last year.

Jain is optimistic that the Swedish marquee could deliver between 30% and 35% growth compared to last year’s figures.

“The demand (for luxury makes) is still there amid lower volume. The demand is mostly coming from the top 20% income group and I don’t think it would be affected much. The lower volume is due to sentiment,” JF Apex Securities Bhd analyst Nursuhaiza Hashim told TMR.

National carmakers seem to be enjoying an uptick in sales. Proton Holdings Bhd’s sales surged 42% YoY to 70,330 units including exports in 9M19, propelling the carmaker to the second position after Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

This figure also surpassed the car manufacturer’s overall sales in 2018 of 64,744 units.

Proton is on track to clinch the No 2 position based on volume this year after a four-year absence, edging out Honda Malaysia Sdn Bhd in an increasingly competitive market.

Perodua sold 178,800 cars between January and September this year, up 6% YoY, increasing its market share to 40.4% from 37% for the same period in 2018.

Perodua and Proton’s rise in market share is coming at the expense of Japanese makes like Toyota, Honda, Nissan and Mazda which have recorded lower sales over the period.