KUALA LUMPUR, April 6 — The automotive industry is expected to deliver better sales numbers in the second quarter of 2022 (Q2 2022) as automakers rush to deliver on bookings before the end of the sales and services tax (SST) exemption in June to avoid cancellation by customers.

In a note, Kenanga Investment Bank Bhd said it expects a buoyant recovery in car sales as evident from the growing number of back-logged bookings for popular models (up to six months) and a stream of new model launches in 2022, including those that were postponed from 2021. 

"Automakers have prioritised usage of scarce resources like diverting any precious semiconductors they have to their most profitable vehicles such as full-size trucks, sport utility vehicles and luxury vehicles.

"Meanwhile, the Malaysian Automotive Association (MAA) has proposed for the extension of the SST exemption to end-2022 as the current chip shortages are limiting automakers’ ability to maximise production capacity to meet back-logged demand,” it said.

Additionally, Kenanga Research said Battery Electric Vehicles (BEVs) new launches are expected to be boosted by incentives such as the full exemption on import and excise duties, sales tax and road tax to support development of the local EV industry.

"Nevertheless, for certain models, the recovery of car production could be limited by the on-going global constraint in semiconductor chips supply,” it said. 

Hence, the research house has maintained its ‘neutral’ call on the industry with 2022 total industry volume (TIV) target of 600,000 units, which is in line with MAA’s 2022 TIV target. 

"Our sector picks are MBM Resources Bhd (MBMR) with target price (TP) RM3.50 per share and DRB-HICOM Bhd with TP of RM1.80 per share, given their exposure to the national marques’ strong volume growth,” it said. — Bernama