Perodua's 1H14 performance

Folks,

I attended Perusahaan (Perodua)'s briefing of its first half of 2014 (1H14) -- six months to June 30, 2014 -- performance by its president and group managing director Datuk Aminar Rashid Salleh on Wednesday, July 16, 2014 at Kuala Lumpur Convention Center.

Of course, being a journalist, I have to translate the briefing into a piece of news, which is shown below.

(source: The Edge Financial Daily, Thursday, July 17, 2014, page 5)

Do note that the briefing by Perodua was conducted earlier than the briefing by the Malaysian Automotive Association (MAA).

MAA is an automotive industry organisation representing all automobile makers in Malaysia. An authority in automotive, MAA compile monthly and yearly automotive statistics, particularly (i) The Total Industry Volume (TIV), and (ii) The Total Production Volume.

TIV is a measure to record the total sales of new cars in a market or region. It is used to gauge a given car market’s performance.

Besides compiling relevant statistics, MAA also provide relevant forecast and industry outlook which reflects the automotive industry landscape in Malaysia. The forecast is also the benchmark used to gauge the industry performance and its figures are widely quoted by researchers, analysts, government agencies as well as relevant stakeholders.

Summary of the Briefing

For those interested to understand the numbers churned by Datuk Aminar Rashid, here are some key take-away from the briefings. Please note that the numbers shown below was compiled by Perodua, and MAA has yet to verify these numbers.

1. Perodua is seeing its market share reduced due to stiff competition and challenging market conditions.

The following table shows Perodua's market share from 2006 until 2013, and also the forecast market share for 2014. Notice that the numbers have been moving on the downward trajectory.

Year	Market Share
2006	31.7%
2007	33.3%
2008	30.5%
2009	31.1%
2010	31.2%
2011	30.0%
2012	30.1%
2013	29.9%
2014f*	28.8%

Source: Perodua

*forecast figure

2. Perodua has reduced its sales target to 193,000 units for 2014

Datuk Aminar Rashid also announced that Perodua has reduced its sales target from 197,000 which was announced early this year to 193,000, citing "formidable competition" as its main culprit.

Below are Perodua's sales figures from 2006 until 1H14 (to-date).

Year	Perodua Sales	TIV
2006	155,400	490,800
2007	162,200	487,200
2008	167,400	548,100
2009	166,700	536,900
2010	188,600	605,200
2011	180,000	600,100
2012	189,100	627,800
2013	196,100	655,800
2014f	193,000	670,000

Source: Perodua

3. Perodua saw its Viva model severely impacted - its bookings and registration recorded negative trends.

Currently, Perodua manufactures and sells three variants - Viva, Myvi and Alza. Of the three, the most hardest hit in terms of bookings and registration is the Viva model, followed by Myvi.

This is what Datuk Aminar Rashid told us in his presentation, on the reason why Viva suffered the most:

"The current bank loan rejection rates that our customer is facing is between 40% to 45%, and at the same time, the  aging stock of the model is old since Viva was introduced in 2007, making it 7 years in the market. We have reduced the price of this model, which saw strong sales of 1,001 cars to date."

Suprisingly, bookings and registration of Alza has been gaining momentum and popularity among Malaysians.

The numbers below will tell you why.

Brands	Booking		Registration
	1H13	1H14	1H13	1H14
Viva	61,100	55,700	47,700	44,300
Myvi	36,200	28,700	26,200	20,000
Alza	31,400	42,200	23,000	30,200
TOTAL	128,800	126,600	96,900	94,500

Source: Perodua

4. National marque market share in 1H14 has dropped below 50%

Datuk Aminar Rashid alerted the reporters that the market share of the national marque has reduced from 51.6% in 1H13 to 47.3% in 1H14. National marque means local cars made by both Proton and Perodua.

Interestingly, the market price of the non-national car leaped from 48.4% in 1H13 to 52.7%. Their sales has been growing stronger with more than 20 new models introduced this year. I have personally witnessed this as I have been to few launches of BMW cars. This year alone, BMW has launched quite a number of cars, and other makers have also aggressively done the same thing. Thus, it is not surprised that sales from these newly launched models from non-national car segments has steadily climbed.

According to Perodua's estimates (again, please verify this with the latest MAA figures):

	1H13	1H14
National cars	51.6%	47.3%
Non-national cars	48.4%	52.7%

Source: Perodua

5. Perodua is taking a cautious stand on Bank Negara Malaysia's recent move in increasing the interest rate by 25 basis points (bps).

When queried by the reporter on recent hike in the overnight policy rate by 25bps, Perodua said that it is cautious as the automaker has yet to see its full impact. Note that interest rate could affect the automotive industry.

Any hike in the interest rate will eventually result in higher installment of the automotive (hire-purchase) loans, and it could affect any automakers sales performance. In this case, we have yet to see whether the interest rate will affect Perodua's sales. Perhaps the numbers to be published in the next few months will enlighten this issue a bit further.

At the moment, Datuk Aminar Rashid is trying to say that opinions on the effect of the hike interest rate is speculative (which may be true, or may be not; depending on the outcome).

Target for 2014

Below is Perodua's target for the year 2014:

Key Performance Indicator	2013	Target for 2014
Sales	196,100 units	193,000 units
Market Share	30.0%	28.8%
Service Intake	1,870,000 units (1.87 million)	1,900,000 units (1.90 million)
Parts Revenue	RM243,000,000 (RM243 million)	RM250,000,000 (RM250 million)
Production Volume	206,700 units	203,900 units

Source: Perodua

Focus on Service and Customer Retention

On its focus for the next six months, Datuk Aminar Rashid said that Perodua's will strengthen its sales and customer service, but he also stressed on the need to improve its service intake.

In this case, the service intake refers to the service of Perodua cars at its authorized service centers.

Previously, after its warranty period lapsed, many has opted to service their cars (regardless of their brands) at any automobile service centers, citing higher expenses will be incurred if they were to service at their own brand's authorized service center. Often, automobile manufacturers would have hard time in retaining their customers to service their vehicle at its authorised service center.

I think that this is true to some extent.

Often, servicing your "second wife" outside your brand's authorized service center seems to be the logical thing as it will lessen the amount of money that you have to fork. However, you do so at your own risk as some service centers may not have their technician properly trained to service particular brands of car.

In recent times, Perodua had seen significant number of its customers maintaining their vehicle service at its authorised service center. This is a positive growth as it provides Perodua with recurring income, to some extent.


Below are the figures given by Perodua:

	1H13	1H14
Service Intake	924,000	956,000
After Warranty Intake	261,000	277,700
Market Share	55%	58%
Revenue	RM261 million	RM272 million

New Launch

Datuk Aminar Rashid told us reporters in his briefing that Perodua will launch new models by the end of this year (he keeps his lip tight on the exact launching date, though).

He said that one of the car that will be launched will be EEV-compliant. EEV stands for energy efficient vehicle.

About Perodua

Perodua, otherwise formally known as Perusahaan Otomobil Kedua Sdn Bhd, was established in 1993 in partnership with Japanese companies.

Shareholders in Perodua include:

Shareholder	Stake in Perodua
UMW Corp Sdn Bhd	38%
MBM Resources Berhad	20%
Daihatsu Motor Co. Ltd	20%
PNB Equity Resource Corporation Sdn Bhd	10%
Daihatsu (Malaysia) Sdn Bhd	5%
Mitsui & Co. Ltd	4.2%
Mitsui & Co, (Asia Pacific) Pte Ltd	2.8%
TOTAL	100.00%

Source: Perodua