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26 Agustus 2022

Automotive Sector Update August 26, 2022

EVs Stole the Big Game Spotlight at GIIAS 2022
 
Indonesian auto sales rise in July-2022
As of 7M22, four wheels (4W) sales had risen by +20.78% YoY to 545k units. Toyota, the market leader, still leads the market with 21.1% YoY growth, followed by Daihatsu and Honda, which grew by 38.3%/11.7% YoY, respectively. We consider the gradual economic recovery potentially supporting the car sales by 5% to 931k units. Meanwhile, Gaikindo also sees that car sales potentially reach 950k units in FY22E. Furthermore, the higher interest rates environment becomes the main risk to the market behavior of 4W vehicle sales. We expect BI to raise the benchmark policy rate by 25-75bps in FY22E to stabilize the IDR and manage inflation.
 
Expect on Better Macroeconomic Conditions in FY22E
MNCS is looking forward for Indonesian economy recovery with 5% GDP growth in FY22E. In our view, the rising commodity prices and public purchasing power potentially support car sales. While at the same time, the elevated LMPV “war” will likely sustain car demand.
 
On the Ground Research: GIIAS 2022
• This year, GIIAS' theme, "Future is Bright", is quite appropriate with the exhibition that displaying electric vehicle (EV) campaign for the Indonesian people. Gaikindo stated that there were ~330k visitors this year, or ~30% growth from the event in 2021.
• Hyundai is still dominating the EV sales with a market share of 91%, where the company had sold 512 units in 7M22, compared to DFSK (5 units), Nissan (31 units), Toyota (10 units) and Lexus (4 units).
• Astra (ASII IJ) at GIIAS had also entered the EV segment competition by preparing the Astra Otopower EV station infrastructure to complete the EV business line in the future.
• “China Car” had also entered the market with Wuling preparing to sell “Airev”, while: 1) Chery; 2) DFSK and 3) MG are planning to enter the market on FY23F.
• The entry of new player, namely Alva One who sells 2W EV, also has the potential to be the market leader due to the comprehensive technology offered compared to competitors.
 
Recommendation : Overweight with Top Picks ASII (BUY, TP : IDR7,425) and AUTO (BUY, TP : IDR1,700)
We believe the automotive sector to grow positively in FY22E on the back of : 1) varied landscape in auto sector as EV becomes alternative; 2) gradual economic recovery momentum and 3) Stimulus extension. We overweight automotive sector with ASII and AUTO as our top pick. Downside risks: Rupiah volatility, rising inflation and interest rates as well as semiconductor chip shortage.
 
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ASII AUTO

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