The outlook for the automotive industry is within expectations, particularly on the back of extension of excise and import duties for hybrid and electric vehicles as announced in the Budget 2012.
Specifically, the full exemption on excise and import duties for hybrids and electric vehicles below 2000cc due to expire this year had been extended by another two years until end-2013.
The government had also proposed that budget taxi owners be given 100 per cent excise duty and sales tax exemptions on the purchase of new locally made taxis.
In a research note, OSK Research Sdn Bhd (OSK Research) director Chris Eng stated, “The extension of duty and import tax exemptions on hybrids and electric vehicles is no surprise given the strong lobbying from automakers and consumers.
“Furthermore, extension to end-2013 would be timely considering the impending launch of the mass produced Proton electric vehicle slated for late 2013.
“Within our automotive coverage, UMW Holdings Bhd stands to benefit from this extension given its 34 per cent share of the hybrid car market via the Lexus and Prius, but the biggest beneficiary would be DRB-Hicom Bhd, which photocommands the lion’s share of 66 per cent via the Honda Insight,” Eng revealed.
The research house made no changes into its earnings forecast for UMW as it had earlier anticipated such an extension. Meanwhile, Tan Chong Motor Sdn Bhd (Tan Chong) had been hinting at the possibility of importing the Nissan Leaf soon.
The report indicated that nationwide sales of hybrid and electric vehicles had jumped almost 20 fold from 269 units (year-to-date, August 2010) to 5,335 units (year-to-date, August 2011).
Eng also addressed Proton Holdings Bhd’s (Proton) position to benefit from new taxis take-up in the industry, opining, “While some auto players will benefit from this move, we see Proton as the biggest winner, mostly from the take-up of locally made taxis and hire cars given the 100 per cent excise tax exemption on top of an interest rate subsidy (of two per cent for a two-year loan), which further reduce selling prices.
“Understandably, from our conversation with taxi drivers, discounts are already being offered but Proton is also set to benefit from the RM3,000 cash incentive to be paid when older taxis are replaced (that is those that are seven to 10 years old) and RM1,000 for cars aged 10 years and above.
“With 107,000 vehicles registered as taxis and hire cars (88,000 taxis and 19,000 hire cars), there is a potential of an estimated 50,000 vehicle owners likely to take up the replacement scheme.”
With regards to the outlook to the big picture, Eng stated, “We remain ‘neutral’ on automotive sector given the deteriorating sentiment, which will dampen sales next year, with sales remaining flat in view of a dearth of new model launches.
OSK Research updated its fair value derivations of the various listed industry players with Proton at RM2 per share, UMW at RM6.29 per share and Tan Chong at RM4.29 per share.
