Automotive sector faces mixed signals
PETALING JAYA: Earnings of companies in the automotive sector in the recently concluded first quarter of 2025 (1Q25) came in below expectations again, says Kenanga Research.
The research firm said earnings were weighed down by external factors and intense competition in the non-national space, where market share is fragmented for vehicles above RM100,000.
For example, it noted that Chinese carmaker Chery has started to build its 100,000 capacity unit plant in Hulu Selangor, which would further disrupt the non-national space. Meanwhile, Malaysia's second national carmaker Perodua's back-loaded production to newer models is expected to be launched in the second half of 2025.
'If the intense competition further ramps up with mass localisation of foreign brands, this may result in the market becoming even more fragmented and may weigh on the valuation for other (auto) players,' said Kenanga Research in a report.
Currently, only the Chery brand has a concrete completely knocked down or CKD localisation programme, while TQ-Wuling Bingo, an electric car under the Tan Chong Motor group, is looking to do semi knocked-down or SKD.
On automotive companies, the research firm said Tan Chong Motor Holdings Bhd's losses were within expectations, as it had anticipated the continued sales volume decline of its bread-and-butter Nissan vehicles. This is compounded by the volatile overseas operating environment, and unfavourable foreign-exchange movements and sales mix.
Over at Sime Darby Bhd , its core net profit plunged 11% for the nine months of financial year 2025, dragged by weaker sales and margins for both industrial and automotive segments which overshadowed the robust consolidation of UMW Holdings Bhd 's earnings.
As for DRB-Hicom Bhd , core net profit plunged largely due to worsening auto sales and margins, wider sequential quarter losses at its postal and property segments, plus lower profit recognition under the group's banking segment.
Touching on Bermaz Auto Bhd (BAuto), it said the company's core net profit halved as vehicles sales volume plummeted on lower margins, which was partially offset by maiden sales of Xpeng vehicles.
'Margins may also face compression risk assuming the yen strengthens amid a hawkish Bank of Japan stance,' Kenanga Research said, adding that the re-rating catalyst for the stock would be the local assembly of the Xpeng and Deepal brands of electric vehicles boosting volume and margins.
For 2025, Kenanga Research envisions a 'two-speed automotive market' where it will be business as usual for the affordable segment.
'Our 2025 total industry volume (TIV) forecast of 805,000 units will be driven by the forward buying interest on the deferment of new excise duty regulations to end-2025. We expect Perodua to benefit the most at 44% TIV market share with the highest localisation rate as well as attractive new launches.'
With the downgrade in its sector heavyweights such as Sime Darby and DRB-Hicom, it downgrades the auto sector rating to 'neutral' from 'overweight'.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
an hour ago
- The Star
China bans bank from luring depositors with popular Labubu dolls
The guidance came in the wake of a promotion by Ping An Bank, which has been offering Labubu collectibles in multiple cities for new depositors. - Photo: EPA-EFE BEIJING: A Chinese lender's stunt to woo depositors with gifts including the wildly popular Labubu dolls has been barred by financial regulators, underscoring the increasingly fraught battle among banks for customers as interest rates and profit margins fall. The Zhejiang branch of the National Financial Regulatory Administration has asked local banks to refrain from giving non-compliant perks to attract deposits, according to people familiar with the matter. The guidance came in the wake of a promotion by Ping An Bank, which has been offering Labubu collectibles – blind box toys endorsed by celebrities including Lisa from the K-pop group Blackpink – in multiple cities for new depositors who can park in 50,000 yuan (S$9,000) for three months. Such a practice, which often involves offering free items like rice or small home appliances, as well as e-gifts such as memberships at internet platforms, was seen as driving up costs at banks and hurting their margins, said the people. While Ping An Bank's marketing campaign went viral on Chinese social media platform Xiaohongshu and sparked strong interest from potential savers, it also drew criticism from state media, which said it was 'not a long-term solution'. Chinese lenders are walking a tightrope as they balance between deposit taking and protecting margins that are now at record-low levels across the sector. The nation's big banks just conducted a new round of deposit rate cuts in May, with smaller peers following suit and pushing term deposit interests down to just a little above 1 per cent. The Zhejiang banking regulator has urged the immediate suspension of any products involved in non-compliant deposit-gathering practices, along with the removal of related promotional materials, the people said. It remains unclear whether the regulator's other local divisions have issued similar guidance. The regulator did not immediately respond to a request for comment. Ping An Bank said the initiative started off as a small-scale project launched by a local branch, declining to comment further. China said in a 2018 rule that commercial banks should not attract deposits through 'inappropriate means' such as giving away physical gifts or returning cash. - Bloomberg
The Sun
an hour ago
- The Sun
China extends anti-dumping probe into EU pork imports
BEIJING: China said Tuesday it was extending an anti-dumping investigation into pork products imported from the European Union, one of several trade pressure points between the two economic giants. Beijing launched the probe last year amid Brussels' scrutiny of Chinese state subsidies for the electric-vehicle (EV) industry. The Chinese commerce ministry said it would prolong the inquiry for six months 'in view of the complexity of this case'. The investigation period will now expire on December 16, the ministry said in a brief statement. The trade spat erupted last summer when the EU moved towards imposing hefty tariffs on EVs imported from China, arguing that Beijing's subsidies were unfairly undercutting European competitors. Beijing denied that claim and announced what were widely seen as retaliatory probes into imported European pork, brandy and dairy products. The EU imposed extra import taxes of up to 35 percent on Chinese EV imports last October. Beijing later lodged a complaint with the World Trade Organization, which said in April that it would set up an expert panel to assess the EU's decision. China and the EU will host a summit next month marking 50 years since Beijing and Brussels established diplomatic ties. The two sides will discuss setting minimum prices for Chinese EVs in Europe and opening a 'green channel' for rare earth exports to the 27-nation bloc, according to official statements.
New Straits Times
an hour ago
- New Straits Times
Asian shares rise, currencies inch lower as US-China trade talks roll into second day
SINGAPORE/HONG KONG: Asian stocks climbed on Tuesday, while regional currencies edged lower against a firmer dollar as investors tracked the second day of high-stakes trade talks between Washington and Beijing. Representatives from China and the US met in London on Monday, just days after US President Donald Trump and Chinese leader Xi Jinping held their first post-inauguration call to address an escalating trade dispute. Trump said he had received "good reports" from officials engaged the talks, which are expected to extend into Tuesday. "The sentiment across Asian stock markets seems to be lifted by optimism around the US-China trade talks, which is seemingly going smoothly," said Poon Panichpibool, markets strategist at Krung Thai Bank. "Developments so far suggest that tensions may ease slightly and that there will be no further escalation into a tariff standoff from either side, which is good." MSCI's broadest index of Asia Pacific shares outside Japan rose as much as 0.8 per cent to its highest level since January 21, 2022. South Korean equities rose 0.6 per cent, and Indonesian shares gained 1.5 per cent. DBS analysts said the second day of trade talks might see the US relaxing restrictions on tech exports in exchange for China resuming rare-earths mineral shipments. The tech-heavy Taiwanese index closed up 2.1 per cent to over a two-month high, with chip giant TSMC jumping 4 per cent. Malaysian stocks added 0.2 per cent. Analysts at United Overseas Bank noted that the country's foreign portfolio inflows in May hit their highest level since March 2016 as signs of tariff de-escalation improved risk appetite. Regional currencies were largely unchanged. The absence of concrete outcomes from Monday's discussions between the world's two largest economies kept currency markets subdued, with traders hesitant to take big positions. "FX markets are largely in consolidation mood, with upticks in USD seen," said Christopher Wong, currency strategist at OCBC. The Malaysian ringgit, Singapore dollar each inched 0.1 per cent lower, while the Taiwanese dollar and Thai baht edged 0.1 per cent higher. The South Korean won fell 0.9 per cent. The US dollar index was up 0.4 per cent as investors awaited US inflation data, which is due on Wednesday. The inflation report is among the final key data points ahead of the US Federal Reserve's June 17-18 meeting, where it is widely expected to keep rates unchanged.
