Ken Yap expects the automotive sales trend to worsen in coming months: His channel checks suggest the outlook for automotive sales will weaken in 2Q09 from the past 3 months. This view was reinforced by local newspaper reports today which quote Toyota Astra Motor marketing director Joko Trisanyoto as predicting that car sales will be flat with a tendency to decline over the next three months. We believe this will be the case for several reasons:
(1) Price increases starting to bite: Demand in 1Q09 has been driven by consumers buying ahead of price increases. Automotive prices as of 1 April 2009 are approximately 15-20% higher than what they were three months ago across all manufacturers.
(2) Credit approval process remains tight: Financing companies continue to be very selective in giving out credit to finance automotive purchases, approving only 30-50% of applicants.
On motorcycle, the MoM industry growth due to introduction of new models and inventory restocking: Channel checks indicate that end market sales have not picked up (though they have stabilised). Also, he highlights the potential for motorcycle price war: Astra Honda Motor (AHM) had a 48% market share in 1Q09, up 370bp from 4Q08. Suzuki (No.3 in the market) lost 400bp of market share QoQ and could potentially start a price war in an attempt to regain lost ground.
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