Comprehensive Analysis of Malaysia’s Automobile Sector Date: February 5, 2025 Broker: UOB Kay Hian Overview of 2024’s Record-Breaking Year The Malaysian automobile sector achieved another record-breaking year with the total industry volume (TIV) reaching 816,747 units in 2024, a 2.1% increase year-on-year. Passenger vehicles drove the growth with a 4% rise, while commercial vehicles experienced a 13% decline. This remarkable performance was largely supported by national brands, especially Perodua, which registered its best-ever sales figures. However, looking ahead to 2025, the report forecasts a 9% decline in TIV to 740,000 units. The anticipated drop is attributed to the normalization of demand, intensified competition from Chinese automakers, and limited market catalysts. Despite this, demand for budget-friendly vehicles is expected to remain strong, particularly for Perodua’s affordable offerings. Company Deep Dive Analysis Bermaz Auto (BAUTO) Recommendation: HOLD Target Price: RM1.42 (Revised from RM2.10) Bermaz Auto has faced significant headwinds in 2024, resulting in a 35% drop in its share price since December 2024. The challenges stem from market concerns about Mazda’s sales volume, increased competition, and weaker earnings expectations for 3QFY25. The report highlights that forecasts for FY25-27 have been revised downward by 10%, 32%, and 30%, respectively, reflecting the lower vehicle sales expected from its key Mazda brand. Intense market competition, particularly from Chinese automakers, has taken a toll on Mazda’s market share, with its sales declining by 12% in 2024. Despite these challenges, Bermaz Auto remains attractive for investors with a dividend yield of 10%. The stock is currently trading at 7.8x FY25F PE, which the analysts consider fair given the challenging market conditions. Sime Darby Recommendation: BUY Target Price: RM2.62 (Revised from RM2.80) Sime Darby faced a challenging 2024 due to slower-than-expected recovery in the Chinese market and increased competition in Malaysia. These factors led to a downward revision of FY25-27 earnings forecasts by 6%, 10%, and 10%, respectively. However, the company’s industrial division is expected to offset the challenges in its motors segment. The industrial arm benefits from strong demand and a stable order book valued between RM4.2 billion and RM4.6 billion. In the motors division, Sime Darby continues to face pressure in China due to an ongoing price war, as well as stiff competition in Malaysia. These conditions are likely to impact 2QFY25 earnings, with softer sales volumes and lower margins anticipated. Despite these difficulties, the company remains a strong pick due to its diversified revenue streams and robust industrial performance. Market Dynamics and Key Insights Perodua: Perodua recorded its best-ever sales in 2024 with 358,102 units sold, an 8% year-on-year increase. Models like Bezza, Axia, and Myvi were the primary drivers, benefiting from strong demand for affordable and fuel-efficient vehicles. Proton: While Proton’s sales fell by 1% to 147,587 units, the brand maintained its second-place market share. Updates to models like the X50 and X70 helped stabilize its position amidst growing competition. Chinese Automakers: The entry of Chinese brands significantly altered the competitive landscape, with Chery surpassing Mazda to become the fifth-largest brand by market share. Aggressive pricing and promotions helped Chery achieve 19,684 unit sales in 2024, a dramatic increase from 6,972 units in 2023. Japanese Brands: Toyota and Mazda struggled in 2024, with each brand experiencing a 12% decline in sales. Their combined market share dropped to 14% from 16% in 2023, primarily due to fierce competition from Chinese entrants. 2025 Outlook: Challenges and Opportunities The forecasted 9% decline in TIV for 2025 reflects an anticipated normalization of demand following the 2024 post-pandemic recovery. Key trends to watch for include: National Brands: Perodua is expected to continue dominating the market with its budget-friendly offerings. Non-National Brands: Non-national brands will likely face ongoing competition from Chinese automakers, which offer competitive pricing and a wide range of vehicles. Electric Vehicles (EVs): EV sales are expected to surge as consumers take advantage of duty exemptions set to expire in late 2025. Conclusion The Malaysian automobile market remains dynamic, with record-breaking sales in 2024 but a challenging outlook for 2025. Companies like Sime Darby and Bermaz Auto are navigating these complexities with mixed results. Sime Darby benefits from its industrial division’s strength, while Bermaz Auto offers attractive dividends despite its challenges. As competition intensifies, particularly from Chinese automakers, and as demand normalizes, national brands like Perodua are expected to maintain their stronghold. Investors should remain vigilant, keeping an eye on shifts in market dynamics and consumer preferences.
Bermaz Auto (BAUTO) Recommendation: HOLD Target Price: RM1.42 (Revised from RM2.10) Bermaz Auto has faced significant headwinds in 2024, resulting in a 35% drop in its share price since December 2024. The challenges stem from market concerns about Mazda’s sales volume, increased competition, and weaker earnings expectations for 3QFY25. The report highlights that forecasts for FY25-27 have been revised downward by 10%, 32%, and 30%, respectively, reflecting the lower vehicle sales expected from its key Mazda brand. Intense market competition, particularly from Chinese automakers, has taken a toll on Mazda’s market share, with its sales declining by 12% in 2024. Despite these challenges, Bermaz Auto remains attractive for investors with a dividend yield of 10%. The stock is currently trading at 7.8x FY25F PE, which the analysts consider fair given the challenging market conditions.
Sime Darby Recommendation: BUY Target Price: RM2.62 (Revised from RM2.80) Sime Darby faced a challenging 2024 due to slower-than-expected recovery in the Chinese market and increased competition in Malaysia. These factors led to a downward revision of FY25-27 earnings forecasts by 6%, 10%, and 10%, respectively. However, the company’s industrial division is expected to offset the challenges in its motors segment. The industrial arm benefits from strong demand and a stable order book valued between RM4.2 billion and RM4.6 billion. In the motors division, Sime Darby continues to face pressure in China due to an ongoing price war, as well as stiff competition in Malaysia. These conditions are likely to impact 2QFY25 earnings, with softer sales volumes and lower margins anticipated. Despite these difficulties, the company remains a strong pick due to its diversified revenue streams and robust industrial performance.
Market Dynamics and Key Insights Perodua: Perodua recorded its best-ever sales in 2024 with 358,102 units sold, an 8% year-on-year increase. Models like Bezza, Axia, and Myvi were the primary drivers, benefiting from strong demand for affordable and fuel-efficient vehicles. Proton: While Proton’s sales fell by 1% to 147,587 units, the brand maintained its second-place market share. Updates to models like the X50 and X70 helped stabilize its position amidst growing competition. Chinese Automakers: The entry of Chinese brands significantly altered the competitive landscape, with Chery surpassing Mazda to become the fifth-largest brand by market share. Aggressive pricing and promotions helped Chery achieve 19,684 unit sales in 2024, a dramatic increase from 6,972 units in 2023. Japanese Brands: Toyota and Mazda struggled in 2024, with each brand experiencing a 12% decline in sales. Their combined market share dropped to 14% from 16% in 2023, primarily due to fierce competition from Chinese entrants.
