KUALA LUMPUR (Sept 21): RHB Research maintained its "neutral" stance on the automotive sector due to low visibility and expectations of a possible weakening in car sales prospects next year.

The lack of significant catalysts to sustain strong new orders and shipments, as well as the potential difficulty of surpassing the record year of 2023, could contribute to a weaker year for the automotive industry in 2024.

“We are also expecting the order backlog of the major marques to gradually ease throughout 4Q2023 (fourth quarter of 2023).

“While stronger electric vehicle (EV) adoption may provide an upside risk to 2024 total industry volume (TIV), we do not think this will be significant enough to move the needle. Our channel checks with industry players indicate that the 2024 outlook remains hazy,” it said in a note on Thursday.

August TIV totalled 72,000 units, mainly from Japanese automakers Honda and Toyota, up 30% and 23% month-on-month respectively, due to their backlogs. This brought the year-to-date TIV to 502,000 units.

Last month's strong performance suggests that 2023 could be another record year for TIV, according to RHB. As a result, the research firm is maintaining its TIV forecast of 725,000 units as strong deliveries from brands with high backlogs are supported by new model launches.

“Our top pick is still Bermaz Auto Bhd ('buy'; target price: RM3.45), as we like its 9% yield and we think its car sales will remain resilient relative to other marques,” RHB said.

Shares of Bermaz Auto gained 0.41% at RM2.43 at the time of writing on Thursday, valuing it at RM2.84 billion.