Tan Chong International profits fall by 86.6% in 1H 2024 due to “severe drop” in Subaru sales

Singapore- and Hong Kong-based Tan Chong International (TCIL) appears to be in dire straits at the moment – the group, which owns Asia’s major Subaru distributor Motor Image, reported a whopping 86.6% drop in profits in the first half of 2024 due to problems with its automotive business.

In a profit warning released to investors on Monday, the company said its profits after tax fell to HK$25 million (RM15 million), compared to HK$187 million (RM112.6 million) in the same period last year. This has been attributed to a “severe drop in sales,” with significant losses in its CKD markets Malaysia and Thailand and CBU markets Taiwan, Singapore (where TCIL is also a Nissan distributor) and Philippines.

The only bright spots were its Singaporean and Japanese subsidiaries, automotive and finance services provider Ethoz Group and logistics company Zero respectively, both of which reported some growth in the first six months of the year.

Despite the “very challenging circumstances,” TCIL said its overall financial health and operational readiness remain “stable and robust.” It also expects to bounce back in the second half of the year, judging from the “relatively strong” number of bookings in its automotive division.

The severe shortfall in sales may have played a part in Subaru’s decision to pull out of completely knocked down (CKD) local assembly operations in Southeast Asia, including not just in Malaysia and Thailand but also in Vietnam and Cambodia. These markets will transition to a completely built up (CBU) model starting next year, with cars being imported from Japan.

Subaru has been assembling vehicles in Malaysia at the Tan Chong Motor Assemblies (TCMA, a subsidiary of Tan Chong Motor Holdings) plant in Segambut since late 2012, building the XV; the Forester, previously also a CKD model, is already a CBU import. The move to cease local assembly will likely have a significant impact in sales, as prices are expected to go up in these markets, further straining TCIL’s bottom line.

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