Fuel subsidy programme a potential catalyst for small engine segment

KUALA LUMPUR, Oct 8 -- National car models, namely Proton and Perodua, are expected to be the key beneficiaries of the fuel subsidy programme.

MIDF Research analyst Hafriz Hezry said the fuel subsidy might entice the cost of living aid (BSH) recipients to switch to smaller engine capacity models, based on the estimated maximum allowable monthly loan commitment of RM1,200 as the maximum income for the BSH recipient group is RM4,000 per month.

In a research note today, he said national car models dominated the lower price and capacity segment of the local automotive market.

“We anticipate a gradual increase in demand from first-time car buyers and two-wheeler owners in the BSH recipient group for the below 1.6 litre models,” Hafriz said.

Following the latest development, MIDF Research maintained its ‘neutral’ call on the automotive sector.

It had also reaffirmed its ‘buy’ call on two companies -- MBM Resources Bhd with target price of RM4.55 following a strong Perodua total industry volume expansion; and Bermaz Auto Bhd with target price of RM2.85 on the back of the potential introduction of a new export model, among others.

On Monday, the Ministry of Domestic Trade and Consumer Affairs announced the implementation of the Targeted Fuel Subsidy Scheme for BSH recipients and the disabled, capped at RM30 a month for car owners and RM12 a month for motorcycle owners.

Maximum vehicle ownership is capped at two cars and two motorcycles for each individual.

-- BERNAMA