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Increase in civil service salary will benefit Proton, Perodua

Perodua Alza 2022 Pandu Uji 03

The upcoming review of civil service salaries is set to benefit the automotive sector as 1.5 million civil servants will have higher purchasing power and find it easier to obtain bank approval, said AmInvestment Bank.

As a result, the investment bank has revised the total industry volume (TIV) in 2024 to 750,000 compared to the previous 740,000.

“Higher salaries automatically mean better debt-to-income ratio, and we believe car loan financing will readily approve new loan applicants.

“We are confident that Perodua and Proton will experience increased demand as they are the most popular brands among civil servants,” he said in the sector update report today, adding that other brands may not be as affected.

Previously, Communications Minister Fahmi Fadzil hinted that civil service salaries would be increased by 15 percent to 43 percent by the end of 2024. Final details will be announced by August 16.

AmInvestment Bank said the main beneficiaries will be MBM Resources (which owns 20 percent of Perodua), Sime Darby (with a 38 percent stake in Perodua), and DRB HICOM, which holds a 50 percent interest in Proton.

It also raised the revenue forecast for MBM Resources for the financial years 2024 to 2026 by 3.0 percent, 5.2 percent, and 3.7 percent, based on expectations of the upcoming civil service salary review boosting car sales, especially for the affordable car segment like Perodua Axia and Bezza models.

The bank has maintained a “Neutral” recommendation on the sector but with a bias towards an upward trend.

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