Rising Tension in LMPV Battlefield
Car Sales Improved in 10M21
Domestic Four Wheels (4W) market booked 703,081 units (+66.98% YoY) in sales volume throughout 10M21. Several players such as Toyota, Daihatsu and Mitsubishi recorded a stellar performance during the same period which was reflected in their sales growth of 32.75%/105.33%/77.54% YoY respectively. Besides the low based effect, the increase in 4W sales was also underpinned by: 1) increasing mobility; 2) lowering loan interest rates particularly for vehicle ownership; 3) 0% DP and 4) PPnBM relax.
Better Macro Environment to Boost Car Sales in FY22F
Looking forward, we see some positive catalyst from macro outlook that is likely to boost domestic car sales to pre-pandemic level in 2022. We foresee Indonesia's GDP to expand by 5.03% next year. In addition, ripple down effect from higher commodity prices is expected to bolster consumer purchasing power. We believe this will be translated into an increase in consumer discretionary spending and further to bring a positive impact on domestic auto sector.
Key Theme in 2022: The LMPV War!
LMPV car models are increasingly gaining traction from domestic buyers, therefore we expect the competition in this arena to intensify. Some players have seen to make a maneuver to maintain and strengthen their position in this market. As the market leader, Toyota introduced a new model on their flagship brand of Toyota New Avanza and Veloz with the brand new design. Furthermore, Toyota and Daihatsu changed Avanza-Xenia design, and converted Veloz to be a premium LMPV with various features, such as 1) TTS (Toyota Safety Sense); 2) 360 camera; 3) Full disc-brake. Honda came with the similar move by introducing their newest LMPV, BRV, that has different design from the previous model. Honda also released BRV with similar safety features of Toyota and Daihatsu, named as Honda Sensing. In our view, those initiatives are reflecting companies strategy to maintain their competitiveness responding to Mitsubishi X-Pander growing market share in LMPV arena. We noted that Mitsubishi X-Pander sales from FY17-9M21 has hit 215,269 units.
PPnBM Relax to Continue to Next Year (?)
Currently, the government through the Ministry of Trade is still evaluating the relaxation of 100% PPnBM discount to be extended to FY22. However, the government has seen the positive impacts coming from this fiscal stimulus, which has been felt by automakers and their subsidiaries which saw a positive growth this year. Since Mar-21, Indonesian government is implements 100% PPnBM discount for new car with engine capacity of 1,500cc; 50% for 1,500-2,500 cc for 4x2 type and 25% for the 4x4 type. This policy has been extended twice and will prevail until the end of 2021.
Recommendation : Overweight with Top Picks ASII (BUY, TP : IDR6,400)
We projected the automotive sector to grow positively in FY22F on the back of : 1) gradual economic recovery momentum and 2) possibility of government stimulus extension. We overweight automotive sector with ASII as our top pick (BUY, TP: IDR6,400) and expecting company’s market share around 51-55% in FY21E-FY22F with new Toyota Avanza and Toyota Rush as key growth drivers. Downside risks : rupiah volatility, rising inflation and interest rates as well as semiconductor chip shortage.
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