Tan Chong Motor Bhd’s (TCM) third quarter of financial year 2023 (3QFY23) losses have widen due to the group’s inability to contain operating expenses says analysts.

For the period under review, the group’s revenue rose by 5 per cent quarter over quarter (q-o-q) due to better contribution from its solar energy division.

However, this was offset by poor cost control which caused the group’s net loss during the period to widen drastically from RM18.1 million in 2QFY23 to RM50.7 million in 3QFY23.

The poor cost control occurred across all of its business divisions, with its bread and butter automotive division leading the pack with its margin falling from 3.1 per cent in 2QFY23 to -3.3 per cent in 3QFFY23.

The negative margin during the period caused the group’s automotive division earnings to plunge from a profit of RM18.2 million in 2QFY23 to a loss of RM19.8 million in 3QFY23.

In contrast, its automotive division revenue had only fallen slightly by one per cent q-o-q during 3QFY23 to

RM649.8 due to slightly lower Nissan vehicle sales.

Meanwhile, the group’s solar financial services segment saw a marginal 1 per cent q-o-q increase in revenue to RM16.1 million but an 18 per cent q-o-q decrease in net profit to RM3.4 million as its margin narrowed to 21.2 per cent from 26.2 per cent in the previous quarter.

According to analyst MIDF Amanah Investment Bank Bhd (MIDF Research) and Maybank Investment Bank Bhd (Maybank Research), the spiralling costs were largely due to a weaker Ringgit causing losses from foreign exchanges (forex) transactions and outstanding balances denominated in foreign currencies.

Cumulatively, the group’s first nine months of financial year (9MFY23) core net loss came in at RM78.4 million, exceeding consensus full-year net loss estimates of RM61.4 million.

Looking ahead, most industry analysts cautioned that TCM’s near to mediumterm outlook continues to be unfavourable due to growing competitiveness of the Malaysia motor industry and the lack of lack of new model launches by Nissan to attract customers.

According to AmInvestment Bank Bhd (AmInvestment Bank), Nissan has been “mainly dependant on sales of ageing facelifted Serena SHybrid, Navara and Almera/ Turbo models without making significant introduction of new models necessary to promote volume growth.”

Year to date (YTD), Nissan’s domestic market share has declined by 0.8 percentage points (ppt) to just 1.3 per cent.

Meanwhile, the group’s Indochina automotive operations while still bleeding has seen some positivity as MIDF Research reports that the group has launched a rebadged version of SGMW’s N300P light truck in Vietnam during Nov.

“The model is assembled at TCM’s Danang plant which could improve the plant’s utilisation rate, though there is no clarity yet on prospective volumes at this juncture,” the research arm mused.

Based on data from Vietnam Automobile Manufacturers’ Association, the commercial vehicle segment is estimated to make up 24 per cent of Vietnam’s 7M23 auto sales.