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Perodua bucks the trend in Malaysia as most car manufacturers see global sales drops
KUALA LUMPUR, Sept 20, 2024: The softening in Total Industry Volume (TIV) is a global trend but in Malaysia, Perodua bucked the declining trend.
The local automotive industry TIV fell 2.3% year-on-year (y-o-y) to 71,162 units despite various promotions to attract buyers.
According to RHB Research, TIV is expected to soften in the second half of the year.
It reported that the major marques saw declines in unit sales last month, with Proton, Toyota and Honda recording drops of 10%, 17% and 5% y-o-y.
However, Perodua recorded its highest ever monthly sales, at 34,700 units (+11.6% y-o-y). Excluding the largest national carmaker, TIV would have dropped by 13% y-o-y in August, RHB Research added.
No News Is Bad News reproduces below selected auto industry news for your reading:
Auto sector likely to hit potholes in second half
-20 Sep 2024, 05:39 PM
Total industry volume is expected to soften in the second half of the year, says RHB Research.
Perodua posted its highest ever monthly sales in August with 34,700 units sold while other major marques saw a drop in sales. (Bernama pic)
PETALING JAYA: The Malaysian automotive industry hit a speed bump in August when total industry volume (TIV) fell 2.3% year-on-year (y-o-y) to 71,162 units despite various promotions to attract buyers.
In fact, some research houses think the auto sector will hit potholes in the months ahead and expect TIV, which tracks new vehicle sales, to soften in the second half of the year (H2 2024).
In a note today, RHB Research said most of the major marques saw declines in unit sales last month, with Proton, Toyota and Honda recording drops of 10%, 17% and 5% y-o-y.
However, Perodua recorded its highest ever monthly sales, at 34,700 units (+11.6% y-o-y). Excluding the largest national carmaker, TIV would have dropped by 13% y-o-y in August, it added.
The research house noted that TIV for the first eight months of the year amounted to 533,000, a 5.9% increase y-o-y.
The strong YTD TIV performance was mainly contributed by passenger car sales, which grew 8% y-o-y while commercial vehicles sales contracted by 14%, likely affected by the removal of the diesel subsidy, it said.
Nevertheless, RHB said TIV performance in September is anticipated to be weaker.
“We anticipate weaker month-on-month TIV numbers in September due to expected scheduled factory maintenance shutdowns by Perodua, which coincided with the recent Malaysia Day long holiday weekend.
“We keep our ‘neutral’ sector weighting as we expect the TIV to soften in H2 2024 in tandem with normalising sales volumes.
Our 790,000 2024 TIV assumption implies an 8% y-o-y decline in the second half, said RHB, which has Bermaz Auto Bhd as its top sector pick.
It has a target price of RM3.05 for the stock, which was trading at RM2.30 at the time of writing.
Meanwhile, Kenanga Research said the auto sector’s mid-market segment could be weighed down by the roll-out of e-invoicing and potential fuel subsidy rationalisation.
It said the B40 (bottom 40% income) group targeted by the affordable car segment will be spared the impact of the fuel subsidy rationalisation.
However, it said the M40 group may hold back from new car purchases, or even downtrade or switch to electric vehicles to cut fuel bills.
Kenanga said the implementation of e-invoicing is set to have a major impact on new car purchases especially in the mid-market segment as it will essentially cease the practice of providing 100% hire purchase financing.
Volkswagen’s possible plant closures in Germany ignite debate, raising concerns over industrial future
Company's restructuring plan faces backlash as country grapples with competition, energy costs
Bahattin Gönültaş |11.09.2024 - Update : 11.09.2024
BERLIN
Volkswagen’s decision to consider closing some of its factories in Germany as part of a €10 billion ($11 billion) cost-cutting plan has sent shockwaves through the country's automotive industry. The move, coupled with the early termination of a 30-year employment protection agreement, is seen as a historic shift for the company and a broader signal of trouble in Germany's industrial sector.
The fact that groundbreaking technologies in the automobile industry have come from China and the US in recent years has been a matter of debate in Europe.
German automakers face competition from electric car maker Tesla as well as inflationary pressures, high energy costs, slow economic growth in Europe and competition from Chinese automakers.
The transition to electric vehicles (EVs) remains challenging for Germany’s automotive sector following the implementation of various regulations and supply chain disruption. The sector is struggling with surging costs while realizing major investments in battery technology.
As part of cost-cutting and savings measures worth around €10 billion ($11 billion), Volkswagen said last week that it was considering closing some of its factories in Germany, where it employs about 300,000 people, for the first time in its 87-year history.
While German automotive suppliers such as Bosch and Continental, which are among the world's largest, and other European automakers have resorted to laying off tens of thousands of workers due to declining margins and demand, Volkswagen, which signed a job security agreement in 1994, has not been able to reduce its workforce.
After taking the helm two years ago, Volkswagen Group CEO Oliver Blume planned to reduce personnel expenses by a fifth by 2026.
But after failing to meet its target of saving €3 billion in two years, Blume last week pushed for more. He announced plans to consider closing factories in Germany, cancelling the company’s 30-year job security guarantee.
This has fueled discussions about the automotive sector in the country and deeply affected the automotive market.
Volkswagen’s management said last week that restructuring based solely on demographic trends is not enough to make the necessary structural adjustments in the short term to increase the company's competitiveness and announced that the closure of vehicle and parts production facilities is inevitable in the current situation.
Following the announcement of the plan, management began talks with employees and their representatives. However, labor unions and the work council said that closing factories was unacceptable.
The meeting between Volkswagen’s management and workers last week began with banners protesting the company's latest austerity plans.
In the face of the crisis at Volkswagen, top politicians have demanded more help from Brussels. German politicians have accused the European Union of putting numerous obstacles in the way of carmakers.
German Economy Minister and Deputy Chancellor Robert Habeck stressed that Volkswagen bears a huge responsibility not only for Germany’s renowned automotive industry but also for its future as an industrial powerhouse and must remain so.
According to the Munich-based Ifo Institute for Economic Research, 70% of cars manufactured in Germany are exported to the UK, France, Italy, Spain and the US. China has also become an important export destination for German manufacturers in recent years due to its market size.
The crisis at Volkswagen has also prompted the German government, which ended its subsidies for electric vehicles late last year, to announce potential new tax breaks for battery-powered cars.
According to a draft law prepared by the German government after it ended green incentives for electric vehicles last year, companies will be able to cut up to 40% of the value of newly purchased electric and qualified zero-emission vehicles from their tax bills.
The extensive savings plans announced by Volkswagen Group have also worried the European Commission.
Speaking to Anadolu, automotive expert Ferdinand Dudenhoffer said: "If you look at (Czech automotive manufacturer) Skoda, they are successful. So it's not the topic of the products and technology. It's more or less the result of the structure of the laws in Germany."
Saying that Germany and Volkswagen are not left behind in the transition to electric vehicles, Dudenhoffer underlined that Germany's shift to electric cars slowed as it stopped subsidizing EVs.
"In a market which is going down, it is difficult for Volkswagen. Because it is the whole market. So the most important thing is that the German political system, Berlin made wrong decisions, which hurt the automotive industry," he said.
Dudenhoffer stressed that German automotive manufacturers have "very strong plans" to manufacture electric vehicles, adding, however that "these plans are not possible to implement due to political reasons."
Pointing to the "strong" EV sector in China, he said Chinese carmakers have a huge cost advantage due to big sales volumes compared to Europe.
Sharing his expectations for the coming five years, he said the European automotive market will become weaker while China will get stronger.
"What we see is that car makers go step by step more into the Chinese market, transfer their budgets and their investments more to China and a little bit to the US," he noted.
"Europe will be a region which will become weaker and weaker, not just in the automotive industry, but also in industrialization as a whole."
Dudenhoffer suggested European automotive producers to cooperate more with China in order to become more competitive and stay stronger.
"Crazy things" like additional tariffs on Chinese cars need to be stopped, he underlined.
"It would be very important to build up a strong European market for electric vehicles. That would be very important, because if you do that, then our companies can also go into electric vehicles technology and come up with cost advantages due to higher volume. So the idea is not to go to combustion engines. The idea is to make the electric vehicle market strong. If you do that, you can compete with China. If not, you will be losing," he said.
Investors shun European car stocks despite rock bottom valuations
By Sruthi Shankar and Danilo Masoni
September 20, 20241:06 PM GMT+8Updated 5 hours ago
Item 1 of 5 Volkswagen's ID Buzz electric van is displayed during the IAA truck show in Hanover, Germany, September 17, 2024. REUTERS/Fabian Bimmer
· Auto shares trade at 60% discount to wider market
· Industry hit by slowdown, China competition
· Sector earnings seen falling more than 13% in 2024
· EU car sales plunged over 18% in August
Sept 20 (Reuters) - European auto stocks are so unpopular right now that investors keep reducing their exposure even as the scale of the industry's problems has driven valuations close to record lows, which would normally be a big incentive for would-be buyers.
The STOXX 600 Autos and Parts index (.SXAP), opens new tab is among this year's worst performers. Analysts predict a 13.6% earnings drop in 2024, a reversal from the years immediately after the pandemic, when supply chain snags handed carmakers licence to raise prices.
Investors believe large cost cuts are becoming unavoidable in a downturn driven by a complex technological shift, fierce competition from Chinese newcomers, and increasingly price-conscious consumers.
They say economies of scale are key, especially for mass-market brands like Germany's Volkswagen (VOWG_p.DE), opens new tab, which is clashing with trade unions over unprecedented plans to shut factories on its home turf, due in part to the Chinese competition and rising labour and energy costs.
European autos now trade at a near-record 60% discount to the wider market represented by the pan-European STOXX 600 index (.STOXX), opens new tab on a price-to-earnings basis. Still, a BofA survey this month showed autos are the most underweighted sector among regional fund managers overseeing $284 billion.
"This toxic cocktail that you have - weakness in China, pricing that has fallen off the peak level, volume growth not happening anymore, higher labour costs - leaves room for some of these stocks to easily drop by another 10-20% if things sour," said Rolf Ganter, head CIO for European equities at UBS Global Wealth Management.
"Valuations are really cheap, but we're not pushing the sector at all."
MORE WARNINGS AHEAD?
Shares in Volkswagen, BMW (BMWG.DE), opens new tab, Mercedes-Benz (MBGn.DE), opens new tab, Renault (RENA.PA), opens new tab and Stellantis (STLAM.MI), opens new tab have fallen by as much as 29-50% from this year's peaks, to multi-month and even multi-year lows.
"The Western auto industry is facing a huge challenge because of the advantage of the Chinese and people don't want to spend as much money on EVs as they did a couple of years ago," said Gilles Guibout, head of European equity strategy at AXA Investment Managers.
Toyota bets big on hybrid-only models as EV demand slows
August 15, 20246:29 PM GMT+8Updated a month ago
A Toyota Corolla Sedan Hybrid is displayed at the 89th Geneva International Motor Show in Geneva, Switzerland March 5, 2019. REUTERS/Denis Balibouse/File Photo
AUSTIN, Texas, Aug 15 (Reuters) - Toyota may be one of the slowest legacy automakers to develop electric vehicles but it could be the first to jettison cars powered only by gasoline.
Almost three decades after launching the Prius, its pioneering gasoline-electric hybrid, Toyota is moving to convert most, and eventually maybe all, of its Toyota and Lexus line-up to hybrid-only models, two Toyota executives told Reuters.
Toyota's stubborn focus on hybrids over EVs is part of a broader challenge by the world's biggest automaker to the prevailing industry and regulatory orthodoxy that all cars will be electric in the near future.
Toyota Chairman Akio Toyoda said in January that he believed the global share of EVs would top out at just 30%. The Japanese automaker instead touts a "multi-pathway" strategy that includes EVs along with hybrids, hydrogen fuel-cell vehicles, green fuels and, potentially, other technologies yet to emerge.
"Going forward, we plan to evaluate, carline by carline, whether going all-hybrid makes sense," David Christ, head of sales and marketing for Toyota in North America, told Reuters.
Those evaluations will come with every model redesign, if not sooner.
That includes the pending overhaul of the RAV4 for the 2026 model year. The RAV4, America's best-selling SUV, already has hybrid variants that account for about half of sales.
Two people familiar with Toyota's product planning discussions said the automaker is highly likely to ditch the gasoline-only version for the North American market, but hasn't made a final call.
The automaker has already stopped offering a gasoline-only version of its Camry, America's best-selling sedan, for the 2025 model year while its rugged Land Cruiser and Sienna minivan, for example, also now come only as hybrids.
Many of the hybrid-only models will also likely come as a plug-in hybrid with a bigger battery, according to the two people, who declined to be named.
Toyota's effort to convert all or almost all of its North American line-up to hybrid-only vehicles has not previously been reported.
NEW EMISSIONS RULES
The automaker's hybrid strategy aims to solidify its already dominant position in a part of the market that has found a new lease on life as demand for EVs slows, partly due to their high prices and charging hassles.
Toyota's hybrids don't need charging and switch seamlessly between gasoline and electric power, or use both at once, depending on driving conditions. Its plug-in hybrids can be charged and typically travel about 40 miles (64 km) on battery power, like an EV, before their gasoline engines are required.
Stripping out two EVs and a fuel-cell car on sale in North America, there are currently 31 other Toyota and Lexus models. Eight are already hybrid-only and eight are available in gasoline versions only.
The hybrid strategy will also give Toyota unique advantages in complying with increasingly tough U.S. carbon-emissions restrictions, Toyota executives and industry experts said.
As the U.S. lowers pollution limits under regulations announced in March, Toyota's booming hybrid sales could help the automaker save billions of dollars in regulatory fines and costs while buying Toyota more time to develop EVs or other zero-emission vehicles.
The new emissions standards, opens new tab take effect from the 2027 model year and run through 2032.
Christ said Toyota hasn't set a deadline for producing an all-hybrid lineup, and that certain models, such as pickups and economy cars, may take longer because of consumer price sensitivity on entry-level versions.
In addition to hybrids, Toyota aims to convert about 30% of its global fleet to EVs by 2030 by focusing on a small number of fully electric versions of existing top-selling models, according to two sources familiar with Toyota's product planning.
Toyota has previously announced plans to invest $35 billion in new batteries and EV platforms by then.
In May, the automaker showcased a small prototype combustion engines it said could one day run on biofuels or low-carbon synthetic gasoline and could be paired with hybrid drivetrains.
But the main point of scaling down the engine size, according to one of the two sources familiar with Toyota's product planning, was to allow it to develop hybrids in a different way. Instead of starting with a gasoline car and adding a battery, it plans to start with its new EV platform and add the tiny engines to create a more efficient hybrid option.
According to one of the two sources, the first hybrid based on the new platform and engine will likely be a Corolla plug-in hybrid, which will likely hit the market in China in 2026 and the United States in 2027.
TIPPING POINT
Toyota's hybrid boom owes to decades of investments in bringing down the cost and boosting the efficiency and performance of its gasoline-electric powertrains.
For most Toyota models, the decision to go hybrid-only is becoming a no-brainer for the automaker and its customers because the technology for a traditional hybrid now typically adds less than $2,000 to a car's retail price.
In addition, while early hybrids were slow, today's models often offer more power than their gasoline-only variants.
Those advances eliminate the two biggest consumer concerns that for years made hybrids largely an automotive niche, accounting for less than 3% of all U.S. sales as recently as 2019. Now they're at 11.3% and rising fast, according to auto services specialist Cox Automotive.
Toyota has seen far more dramatic growth because of its dominance of the hybrid sector, bringing the automaker to the tipping point that has pushed executives to now consider an all-hybrid lineup. Hybrids accounted for just 9% of Toyota sales in 2018 but 37% as of June.
The hybrid sales surge has been a key factor driving its profit and stock price to all-time highs this year.
Christ said Toyota expects hybrid sales to keep accelerating. "Next year," he said, "we definitely will be well over 50% of our total volume."
Toyota's U.S. hybrid sales through June 30 shot up 66% from last year to 438,845 vehicles, the company said, compared with EV sales of just 15,107.
Atlanta-based Cox Automotive estimates demand growth for EVs will likely remain modest for the next few years.
"EV growth is going to continue, but it's not going to hit the big pace we saw in the last few years," Cox senior analyst Stephanie Valdez Streaty said.
"Regular gas-electric hybrids and plug-ins will continue to eat into EV sales in the meantime because they are easier and more familiar alternatives and there's no range anxiety."
HYBRIDS BUY TIME
Toyota's plan to offer more plug-in hybrids aims to take advantage of U.S. emissions rules that give them outsized credit for reducing pollution. That's now possible because Toyota is opening a North Carolina battery plant that, by 2030, will have 14 production lines capable of producing 30 gigawatt-hours (GWh) of batteries annually.
Plug-ins have so far sold in far lower volumes than traditional hybrids because of their substantial extra cost. Toyota's current plug-in hybrid models tend to cost $5,000 or $6,000 more than comparable gasoline models.
Mass-market hybrid sales will give Toyota invaluable time to develop EVs and other next-generation technologies, said Katsuhiko Hirose, one of Toyota's managers who led its global powertrain planning from 2001 through his retirement in 2019.
Hirose, now a visiting professor at Japan's Kyushu University and an energy consultant, estimated U.S. regulations would essentially require Toyota to go nearly all-hybrid by around 2030 - with an increasing share of plug-in hybrids - to avoid regulatory fines or other costs.
"(Hybrids) will buy them more time and give Toyota flexibility over how fast and how many EVs they'd have to roll out," Hirose said. "They wouldn't feel pinned against the wall to produce EVs."
Reporting by Norihiko Shirouzu; Editing by Brian Thevenot and David Clarke
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