KUALA LUMPUR (Nikkei Markets) -- Malaysia's largest carmaker by volume, Perusahaan Otomobil Kedua, bolstered by strong demand in the first six months of this year, on Wednesday raised its annual sales target by nearly 2%.
However, analysts doubt the ability of the company, commonly known as Perodua, to sustain such sales momentum in the months ahead as competition intensifies with rivals lining up more models to gain market share in Southeast Asia's third-largest economy.
Perodua, an associate of UMW Holdings, expects to sell 235,000 vehicles this year, higher than its January aim of 231,000 units, said Chief Executive Zainal Abidin Ahmad. The company sold 227,243 units last year.
"For second half, we are focusing more on customer delivery," Zainal said. "Our inventory cannot cope with demand."
The robust demand comes at a time when Malaysia's decelerating economic growth has potentially raised the appeal of national marques, which are cheaper alternatives to foreign brands. To capitalize on shifting consumer preference, companies have also launched smaller vehicles with lower price tags.
Domestic rival Proton has also reported a surge in orders with sales climbing to its highest in nearly four years. Proton, a unit of industrial conglomerate DRB-HICOM, sold 61% more vehicles from a year earlier in the first six months of 2019.
Analysts however flagged intensifying competition from foreign players such as Honda and Mazda that seek to challenge Proton and Perodua, which together account for more than half of Malaysia's total industry volume.
"With that said, we expect the national marques to continue spearheading the local automobile sector as they provide similar alternatives at more affordable price tags," AmInvestment Bank wrote in a note to clients. "To a certain extent, these cheaper alternatives offer better value for money."
Malaysia's automobile market was once dominated by local carmakers Proton and Perodua. However, a deluge of feature-rich foreign vehicles coupled with cheap financing option started to chip away local carmakers' market share. A sluggish response from Proton and Perodua to roll out new models and expand product portfolio also hurt their sales prospects. DRB-HICOM sold a 49.9% stake in Proton to China's Zhejiang Geely Holdings Group to help turn around the company, backed by pledges to launch new models.
In the first half, Perodua sold 121,800 vehicles, 4% higher than 117,100 units it sold in the same period last year, the company said in a statement. Bookings in the first half rose more than 3% from a year earlier to 190,765 units.
Based on its latest forecast, Perodua is expected to purchase a total of 5.4 billion ringgit ($1.3 billion) worth of auto-parts for the whole of 2019, Zainal said. Meanwhile, Perodua is also working with Daihatsu Motor Co. to further develop its component suppliers to explore markets beyond Malaysia, he added.
In terms of production, the company raised 2019 production target to 249,000 vehicles from 242,000 initial aim, to better manage inventory and cut delivery time. For this year, Perodua plans to spend 667.6 million ringgit mostly on research and technology acquisition, Zainal said.
Shares of UMW Holdings fell 0.2% to 5.39 ringgit, while DRB-HICOM, which also assembles Honda and Mercedes-Benz vehicles, fell 1.2% to 2.42 ringgit. The benchmark FTSE Bursa Malaysia KLCI closed 0.7% lower.
-- Gho Chee Yuan