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Bahana Securities

23 Oct 2019 | 18:28 WIB
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23 Oct 2019 | 18:28 WIB
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Automotive: Weak January wholesales figures

Based on sales figures (exhibit 1 & 2) released by Gaikindo (4W association) and AISI (2W association), January 2016 4W sales reached 85k units, +16% m-m on December's low base effect; however, 4W wholesales were down 10% y-y as several brands attempted to lower their inventory levels due to stock pile ups from previous months.

For 2W, January wholesales performance was even worse reaching 416k units, -17% y-y and -20% m-m, as producers cut their inventories on the expectations of weak demand from the outer Java areas.

In January, ASII's market share declined to 46.6% (Dec-15: 49.8%; Jan-15: 46.5%) with monthly sales of 39.6k units, -10% y-y but +9% m-m, as it decreased its inventories on stock pile ups - this is despite retail sales of Toyota and Daihatsu being stronger than at wholesale levels.

At the same time, Nissan booked monthly sales of 1.4k units, -24% y-y and -12% m-m. On the flip side, Honda recorded strong January sales of 19k units, +15% y-y and +63% m-m, due to its new product Honda BRV.

Based on our channel checks (exhibits 3 & 4), we are seeing higher discounts across the board in February compared to January. In February, Toyota Avanza is being discounted by IDR16mn (8.1%), higher than the IDR10mn (5.0%) level in January. This is in line with our expectation that discounts will increase going forward in order to stimulate demand as IDR continues to strengthen.

Honda’s January 2W sales (ASII) reached only 288k units, -15% y-y and -15% m-m, reflecting a higher market share of 69.1% (Dec-15: 65.1%; Jan-15: 67.6%). At the same time, Yamaha booked even lower sales of 112k units, -20% y-y and -34% m-m, reflecting a lower market share of 26.9% (Dec-15: 32.7%; Jan-15: 27.9%).

With ASII losing market share in the 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 likely to materialize in 2H16.

Thus, we expect margins to remain unexciting in spite of a low 2015 base. On volumes, we forecast flat 2016 domestic sales of 1.02mn units for 4W and 6.4mn units for 2W despite lower interest rates and gasoline prices. 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 Indonesia’s automotive sector on a likely fight for market share and due to limited purchasing power growth on trends of weak commodity prices.

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