Stronger Incumbent Despite Weakening Sales
Weak 4W Sales Before the Election
During 4M19, four wheels (4W) sales has weakened by -14.30% YoY to 337,892 units. The weakening sales has happened in both segment, commercial vehicle (CV) and passenger vehicle (PV), by -17.98% YoY and -13.15% YoY, respectively. We see that election year pushed many business performers to hold back their capital expenditure because of the uncertainty of election winner, thus the regulation that will prevail after the election. We see that steady economic growth in 1Q19 at 5.07% and higher vehicle loan interest (+13bps in 2M19 since 5M18) had detained 4W sales.
Toyota Avanza is Back to Lead Again
Although LMPV sales in 4M19 was decreased by -14.93% YoY, LMPV sales booked 4.18% YoY growth to 243,723 units during FY18. Toyota Avanza is able to take over the market again with market share at 37% in 4M19 with its new model, after its competitor launched same prototype such as Mitsubishi Xpander and Wulling Confero. New launch of Toyota Avanza and Daihatsu Xenia by PT Astra International Tbk (ASII), could maintain its market share and even boosted Toyota Avanza market share to 37% in 4M19 (vs 31% in 1Q18). We consider that LMPV growth will tend to be stable with intense competition along with economic growth and the rapid growth of online transportation.
Commercial Vehicles Improved Along with Logistics Sector Growth
Commercial vehicle sales reached 17.56% YoY to 276,631 units in FY18, which has gradually improved since FY16 where sales only reached 200,742 units, along with Logistic Performance Index (LPI) at 2.98. Infrastructure development has been completed and encouraged national logistics activities, including the commercial vehicles sales, which can be seen from the LPI which increased to the level of 3.15 in FY18. An increase in the performance of the logistics sector can be seen from truck and pick-up sales, which grew by 27.37% YoY and 11.76% YoY in FY18, respectively. We see that commercial vehicles will be helped with logistics potential demand for land lines.
Electric Vehicle Progress that Begins to Appear
The Ministry of Industry targets to build the electric vehicle industry in the country by 2022 supported by several programs, such as PT PLN (Persero) whom prepares charging stations as electric vehicles infrastructure, called by Stasiun Pengisian Listrik Umum (SPLU). Automotive companies, such as Toyota, Wulling etc., are preparing for electric vehicle potential demand once the regulation is settled. BYD plans to invest in Indonesia as informed by the news, in order to anticipate electric vehicle demand in Indonesia. We see that the trend of electric vehicles will have a positive effect on the automotive sector along with the development of its infrastructure.
Recommendation: Neutral with Top Picks ASII (BUY, TP: IDR8,400)
We consider that the automotive sector in FY19E will grow steadily along with economic growth. We revise passenger vehicles projection to reach ~890,000 units from 900,000 units and commercial vehicles to ~290,000 units with overall growth at ~2.50% YoY in FY19E. We consider that ASII can maintain a market share around 51% in FY19E with new Toyota Avanza and Toyota Rush. We recommend NEUTRAL for the automotive sector with ASII as stock recommendation (BUY, TP: IDR8,400). Rupiah volatility, inflation and rising interest rates will be obstacles for automotive sector.
