Malaysia's third version of its National Automotive Policy (NAP) will be "the most scrutinised" compared to earlier versions as it will chart the country's automotive sector over the next decade, but vehicle sales growth is expected to be "tepid" in 2020, Maybank Kim Eng analysts said.
"It is crucial for the policy makers to get this right this round, for it will shape the direction of the nation’s automotive industry, in terms of competition and attracting foreign direct investments, in a challenging yet revolutionising market as a whole," Liaw Thong Jung, Maybank KE analyst, wrote in a recent report focusing on Malaysia's automotive sector.
He expects the revised policy to see a shift in focus from energy-efficient vehicles to the next-generation vehicle through a roadmap that will be implemented over three phases until 2030.
The first phase is expected to focus on battery production, management systems and the establishment of electric vehicle-charging stations, while the following stages could emphasise other technological advancements such as 5G connectivity, Mr Liaw said.
Meanwhile, Mr Liaw said Malaysia's full-year total industry volume (TIV), which captures the sale of passenger and commercial vehicles, is on track to reach 600,000 units, a forecast set earlier by the Malaysian Automotive Association.
This is even though November's TIV fell by 2 per cent month on month, due to weaker Perodua sales, bringing TIV for the first 11 months to 550,000 units. Perodua is the most popular marque in Malaysia.
Regardless of the weaker sales, Mr Liaw noted that Perodua would still surpass its target of 235,000 units in 2019, while Proton is holding on well and could end the year selling close to 100,000 units.
This makes MBM Resource, which carries Perodua, a key "buy" for the sector, he said, alongside UMW and Sime Darby. Bermaz Auto is a "hold", with its dividend yield being a key attraction, while Tan Chong Motor is Maybank KE's only "sell" in the sector.
Stronger-than-expected deliveries of new launches, a firmer Malaysian Ringgit against the US dollar and Japanese Yen and an annoucement of end-of-life vehicle policy in the NAP could present upside risks to the sector, Mr Liaw said.
However, a weaker currency, supply chain disruption and tighter financing guidelines for car buyers could bring downside risks, he added.