Citi sees higher rates, chip shortage as headwinds for Aussie auto sector despite Oct sales rise

ARB

07/11/2022 23:57

** Citi says new car sales in Australia continued to grow in
October 2022, increasing  by 17% from a year earlier, driven by
continued strength in the SUV/4x4 category, among others
    ** Says it remains cautious around rising interest rates
potentially impacting consumers' ability to secure financing for
new car purchases which could impact short- to medium-term
demand
    ** The Reserve Bank of Australia had hiked interest rates by
25 basis points in Oct and Nov
    ** Citi adds that there is uncertainty on when the original
equipment manufacturer supply chains will completely recover due
to extent of semiconductor shortages which could continue on
till CY23  
    ** Citi retains "buy" on Australia's automotive parts and
accessories maker Bapcor  BAP.AX  on its exposure to less
discretionary products
    ** Brokerage also gives "buy" rating to ARB Corp  ARB.AX 
because of its export growth potential and relatively stronger
balance sheet compared to "neutral"-rated GUD Holdings Ltd
 GUD.AX 
    ** As of last close, ARB down 46.9% this year, BAP down 4.4%
and GUD down 30.9%
 (Reporting by Udbhav Krishna P in Bengaluru)
 ((UdbhavKrishna.P@Thomsonreuters.com))