PETALING JAYA (Aug 27): Sime Darby Bhd (KL:SIME) is expecting demand for diesel-powered vehicles under its portfolio, especially the Toyota Hilux, to remain strong despite the rationalisation of diesel subsidy that took effect from June 1 this year.

Group chief financial officer Muhammad Noor Abd Aziz said demand will be sustained by the commercial sector as they will continue to require such vehicles for work deliveries.

"From the initial reports we received, there has been some 'wait-and-see' reaction [following the diesel subsidy rationalisation], but we expect demand will continue to be strong, especially for [Toyota] Hilux, the second-most important model for us.

"And Hilux is more used for commercial [purposes] where it is needed. It's reliable and a workhorse for the industry," he told reporters at a media briefing on Sime Darby's performance for its financial year ended June 30, 2024 (FY2024).

Sime Darby's motor division recorded total revenue of RM37.19 billion for FY2024, up 17.9% from RM31.55 billion in FY2023, mostly attributed to its strong performance in Malaysia and Singapore.

However, the division's profit before interest and tax (PBIT) fell 44.5% year-on-year to RM584 million, as it recorded one-off impairments and provisions of RM229 million, while the previous year included a property disposal gain of RM179 million. Excluding these one-off items, PBIT for the motor division dipped by 6.9%, primarily due to losses recorded in mainland China and lower dividend income.

Over at UMW Holdings Bhd, which officially joined the group in March, auto sales recorded a notable spike due to seasonal purchases during the Hari Raya celebration, bringing total automotive revenue to RM8.18 billion.

"This growth is largely driven by strong sales from Perodua, which continues to dominate the market and significantly contributes to the overall increase in total industry volume (TIV)," Muhammad Noor said.

While he acknowledged that there could be "a bit of an impact" if and when the subsidy rationalisation for RON95 is introduced, Sime Darby group chief executive officer Datuk Jeffri Salim Davidson said auto sales will eventually return to the "normal equilibrium".

"If you look at the past, when you've had the government [introduce], for example, tax increase, there was a short term dip. Then it goes back to where it normally sits because people need cars. So, that's the kind of thing I guess will happen," he said.

"I think the bigger issue around the impact on the business in Malaysia is less to do with fuel subsidy, but it's also around competition," Jeffri said, as he referred to the stiff competition surrounding the electric vehicle (EV) market.

"We are seeing a lot of new entrants into the market, a lot of new Chinese EVs coming in. If anything, I think that will be an interesting space to watch to see how it is going to generally affect the car market in Malaysia."

Muhammad Noor further noted that the group sold a total of 142,901 units of vehicles in FY2024, up 22.4% from 116,768 in FY2023. And EV models made up 19% of its total automotive sales in FY2024.

According to him, the highest EV adoption by market for the group is Hong Kong, where 67% of its sales in the market in FY2024 comprised EVs, followed by Singapore at 41%. In Malaysia, EVs made up 24% of its automotive sales.

So, there is "very strong EV adoption" in the group's portfolio, Muhammad Noor added.

In December 2022, Sime Darby Motors, the automotive arm of Sime Darby, was appointed as the official exclusive distributor of China BYD's passenger EVs. Sime Darby Motors also carries EV models by BMW, Peugeot, Hyundai and Volvo, among others.

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