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RAM Maintains Negative Outlook On Motor Vehicle Sector

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KUALA LUMPUR – RAM Rating Services Bhd has maintained a negative outlook on the
motor vehicle sector.

It said the total industry volume (TIV) was expected to contract by up to 10
per cent this year following a 17.6 per cent year-on-year plunge in vehicle
sales to 218,101 units in the first five months of the year.

In a statement today, RAM’s Head of Consumer and Industrial Ratings, Kevin
Lim, said poor consumer sentiment, compounded by the frontloading of sales last
year, had resulted in the severe downtrend in TIV, the extent of which was
deeper than it had initially expected.

“Consumer confidence is expected to remain weak this year owing to the
uncertain economic environment, the rising cost of living and tighter credit

“These challenges will pose a severe drag on motor vehicle sales, although a
slight uptick is anticipated in second half, in view of the introduction of
significant new models,” he said.

Lim said most industry players faced slimmer margins from a higher cost
structure and intense competition.

RAM said the growth in TIV last year had been flat, totalling 666,674 units
versus 666,465 units in 2014.

It said the severe devaluation of the ringgit last year had impacted the
sector, given the higher costs of imported completely-knocked-down vehicle kits
and car parts.

These costs had mostly been absorbed by the manufacturers in view of intense
competition amid an environment of weaker demand which had necessitated
promotions and discounts, it said.

The agency also expected the ringgit to remain weak against the US dollar
at between RM4 and RM4.25 this year.

However, it expected a gradual recovery next year, in line with its
anticipation of a measured retracement in the value of the ringgit over the
medium term.


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