KUALA LUMPUR: Vehicle sales in January surged to 50,622 units, an increase of 32.8% from 38,107 vehicles a year ago, as an improving economic outlook whets consumers’ appetite for big-ticket item purchases.

The Malaysian Automotive Association (MAA) said yesterday vehicle sales or total industry volume (TIV) in January 2010 was also 6.2% higher compared with 47,668 units in December 2009.

“Market situation and consumers’ sentiments are very much more favourable compared to a year ago when the global economic downturn set in. Several new models launched recently contributed to the higher sales,” the trade body said.

OSK Research Sdn Bhd analyst Ahmad Maghfur Usman said the MAA’s latest figures reflected an improvement in consumer sentiment.

He said the jump in January 2010 TIV was due to consumers postponing their intended vehicle and other big-ticket item purchases last year to this year. “Demand has always been there,” he told The Edge Financial Daily.

Of the 50,622 vehicles sold in January, 45,973 were passenger vehicles and the remaining were commercial vehicles.

In anticipation of a pick-up in sales, manufacturers and assemblers also ramped up output of vehicles to 51,296 units, up a commendable 37% from 37,427 units a year ago. Of the 51,296 units, passenger vehicles accounted for 46,172 units and the rest were commercial vehicles.

The MAA last year projected TIV to reach 550,000 units in 2010, compared with 536,905 units in 2009. Its upbeat outlook was based on the strong performance in the last quarter of 2009 with carried over orders into 2010.

For 2011 to 2014, the MAA has projected TIV to grow 3% to 566,500 (in 2011), chalk up an increase of 3% also to 583,500 (2012) and grow 2.8% to 600,000 (2013) and expand by 3% to 618,000 (2014).

Demand for big-ticket items like real estate, and cars are crucial indicators of consumers’ propensity to spend, a much needed boost to drive domestic demand amid weaker exports which have hurt the country’s economic fortunes.

While policymakers’ stimulus packages are crucial to rejuvenate the local economy, external events would also impact local sentiments.

Against the improving global backdrop, Malaysian companies are repositioning themselves as they expect local consumers’ improving appetite for big-ticket purchases.

The availability of cheap credit amid an improving economic landscape are crucial to boost consumer demand for real estate and cars.

The banks’ move to raise hire purchase (HP) rates for foreign vehicle brands last year was deemed untimely as it could further stifle potential car buyers’ interest to change their vehicles at a time when consumer demand had waned.

However, consumers, who had postponed their purchases of vehicles because of the higher HP rates, decided to go ahead in January.

Meanwhile, the impact of imported luxury vehicles from the grey market is worth noting. The grey market refers to new or used motor vehicles and motorcycles legally imported from another country via channels other than the manufacturers’ official distribution system.

According to CIMB Equities Research, the intense competition from grey market importers, while negative, is unlikely to have a major impact on players like Tan Chong Motor Holdings Bhd and UMW Holdings Bhd. Both companies have small exposure to the luxury car segment.

“Nonetheless, we are surprised by the size of the grey market, which implies that the auto market in Malaysia may be even larger than expected.

“This bodes well for companies with strong competitive advantage, solid brand names and extensive product portfolios,” its analyst Loke Wei Wern said in a research note.

Automotive players’ revenue should benefit from stronger demand for vehicles while a firmer ringgit against the US dollar and yen should set the stage for a recovery in profit margins, according to the analyst.

CIMB Research, which maintained its 2010 TIV forecast at 569,070 units, or 6% above the 2009 numbers, is also retaining its Overweight call for the Malaysian automotive sector.

Among automotive firms, the research house has maintained its earnings forecast and recommendations for Proton Holdings Bhd, Tan Chong, and UMW.

CIMB rates Proton as Trading Buy with a target price of RM6.30, while Tan Chong and UMW were rated as Outperform with fair values of RM4.65 and RM8.10 respectively.

OSK Research has “Buy” calls on Proton, and Tan Chong with fair values of RM5.90 and RM4.12 respectively, while UMW is rated as “neutral” with a target price of RM6.35.