KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) research expects the automotive sector record lower sales volume in the coming quarters and post a "normalised" total industry volume of 720,000 for 2024.

Malaysian Automotive Association (MAA) reported March 2024 TIV total industry volume (TIV) at 71,100 units, settling the first quarter (Q1) 2024 TIV strongly at 202,200units.

HLIB said the sales were mainly driven by existing order backlogs, improved supply chains, attractive new model launches and continued strong demand.

"Nevertheless, we expect 2024 TIV to normalise downwards to 720,000 units vs MAA's 740,000 units.

"As current order backlogs soften, we expect slower sales volume in coming quarters," it said in a note.

Meanwhile, HLIB expects earnings for the sector to dip in 2024 due to lower sales volume and higher operating costs.

The bank has also noticed more aggressive new launches by Chinese original equipment manufacturers (OEMs) with attractive pricings, which will provide stiff competition towards incumbent OEMs.

"We maintain our Neutral call on the automotive sector with top picks DRB-Hicom Bhd (Buy: target price RM2.00) and MBM Resources Bhd (Buy: target price :RM5.40).

"The entrance of several new OEMs into the market may pose threats to non-national OEMs, due to their attractive pricing.

"Government has also set 2025 as the target for national OEMs to introduce new affordable electric vehicles (EV) models," it added.