Auto companies hope for stronger ringgit

By THE STAR | 25 July 2016


PETALING JAYA: Local automotive players with foreign exchange (forex) exposure are hopeful that the ringgit will start to strengthen by next year.

During a review of vehicle sales for the first half of 2016 by the Malaysian Automotive Association (MAA) last week, Edaran Tan Chong Motor Sdn Bhd executive director Datuk Dr Ang Bon Beng said forex had caused “a big dent” in the company’s sales margins.

“In the short term, we don’t see any improvement,” he added.

Tan Chong Motor Holdings Bhd posted net losses of RM37.21mil in the first quarter ended March 31, 2016, as it was impacted by intense competition in the auto industry as well as the weak ringgit.

The company, which sells Nissan models, sold 21,148 units in the first half of 2016 compared with 23,294 units in the previous corresponding period.

UMW Toyota Motor Sdn Bhd senior manager for marketing Mohd Mazwan Mohd Safwan said he expected the ringgit to depreciate further this year.

“We expect it to pick up by 2017 or 2018,” he said.

UMW Toyota is a unit of UMW Holdings Bhd, which went into the red due to a loss of RM700mil from forex as well as RM337.7mil in impairment charges for its oil and gas assets last year. This is because the group was affected by the higher cost incurred in purchasing its completely-knocked-down units in US dollar.

Another reason is the anticipated slower sales of Toyota vehicles this year to about 80,000 units compared to 95,861 units last year, including the high end Lexus model.

According to a recent report by Kenanga Research, for every 1% fluctuation in the US dollar, UMW’s bottom line could be affected by 3%. Toyota sold 27,249 units in the first half of 2016 compared with 38,796 units in the previous corresponding period.

Honda Malaysia Sdn Bhd president and chief operating officer Roslan Abdullah said he did not expect much improvement in the ringgit this year, while Daihatsu (M) Sdn Bhd managing director Cheng Seng Fook also echoed Mohd Mazwan’s sentiment that the local currency should pick up earliest next year.

Honda sold 39,654 units in the first half of 2016 compared with 43,596 units in the previous corresponding period, while Daihatsu saw sales rise 5% year-on-year to 516 in the first six months of 2016.

The MAA has revised its 2016 total industry volume (TIV) forecast downwards to 580,000 units from 650,000 units initially, due to lower vehicle sales in the first half of this year.

Vehicle sales plunged to 275,459 units in the first six months of this year from 322,254 units in the first six months of 2015.

A total of 244,357 units of passenger vehicles were sold in the first half of 2016, compared with 286,608 units in the previous corresponding period. Sales of commercial vehicles dropped to 31,102 units in the first six months of 2016, compared with 35,646 units a year earlier.

In January, the MAA had projected a drop in TIV of 2.5% from 666,674 in 2015 to 650,000 this year.

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