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Stock Index
Bahana Securities

23 Oct 2019 | 17:56 WIB
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23 Oct 2019 | 17:56 WIB
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Automotive: Weak December wholesale sales

Based on sales figures (exhibit 1 & 2) released by Gaikindo (4W association) and AISI (2W association), December 4W sales reached 73k units, -16% m-m with 2W sales reaching 520k units, -3% m-m, as demand has the propensity to decline towards the end of the year on holidays. On y-y basis, both 4W and 2W sales, as expected, were down 7% y-y, reflecting continued weak economic conditions with customers deferring purchases into next year.

In December, ASII's market share declined to 49.8% (Nov-15: 52.6%; Dec-14: 53.8%) with monthly sales of 36.5k units, -20% m-m and -14% y-y, despite attempts to lower its inventories amid disappointing demand from its new models. At the same time, Nissan booked monthly sales of 1.5k units, +1% m-m but -11% y-y. Suzuki booked strong December sales of 10.6k units, +14% m-m and +5% y-y, due to its new Ertiga models.

Based on our channel checks (exhibit 3 & 4), we are seeing improved discounts across the board in January compared to December for 2016 cars. In January, Toyota Avanza is being discounted at IDR10mn (5.0%), much lower than the IDR24mn (12.1%) level in December. However, discounts for 2015 cars are similar to December 2015 discounts. It remains to be seen whether these smaller discounts can be sustained amid continued weak mining activities in the outlying areas.

Honda’s December 2W sales (ASII) reached 339k units, -14% m-m and -10% y-y, bringing market share down to 65.1% (Nov-15: 73.7%; Dec-14: 67.5%). On the flip side, Yamaha managed to improve sales (+35% m-m & 8% y-y) during the month, reflecting improved market share of 32.7% (Nov-15: 23.4%; Dec-14: 28.4%).

With ASII losing market share in 4W segment, the next competitive step could be heavier discounting in our view. This fight for market share is likely to be exacerbated by continued soft farmer incomes due to low commodity prices with some purchasing power recovery only to materialize in 2H16. Thus, we expect margins to remain unexciting in spite of a low 2015 base. On volumes, we forecast flat domestic 2016 sales of 1.02mn units for 4W and 6.4mn units for 2W despite lower interest rates and gasoline prices. With that said, we expect intense competition and weak demand to result in flat market shares at best for both ASII and IMAS.

At this stage of the market cycle, we retain our UNDERWEIGHT call on the Indonesia automotive sector on possible market share fight and due to limited purchasing power growth on weak commodity price trends.

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