KUALA LUMPUR (June 19): Malaysia's automotive sector is expected to remain supported by resilient underlying demand and favourable income policies, according to analysts.
The official total industry volume (TIV) for the year is 780,000 units based on data from the Malaysian Automotive Association. This compares with the country's record-high TIV of 816,724 units in 2024.
"We maintain our neutral view on the automotive sector, supported by resilient underlying demand and favourable income policies.
"Expectations of new OMV [open market value] duties, potentially effective by 2026, may spur early purchases and boost 4Q2025 sales," said BIMB Securities in a research note on Thursday.
As of May, year-to-date TIV has reached 316,737 units, or 40.6% relative to the annual TIV target, and was down 5% compared to 333,309 units in the same period last year.
In May itself, TIV rose 12.4% to 68,007 units, from 60,527 units in April, driven by stronger passenger vehicle sales, which increased 12.1% month-on-month (m-o-m) to 55,971 units. Commercial vehicle volumes also climbed 15.2% m-o-m to 5,250 units.
RHB Research, in a note on Wednesday, maintained its 2025 TIV target at 730,000 units.
"While we think the impending expiry of the tax exemption on CBU (completely built-up) EVs (electric vehicles) post-2025 could result in a surge of EV sales volumes this year, the local EV market remains modest, accounting for circa 2% of total car sales. Hence, it is unlikely that a surge in EV demand would materially move the TIV needle in 2025," it said.
BIMB warned that key downside risks include global supply chain disruptions, softer consumer sentiment amid rising living costs, and competition pressure from Chinese original equipment manufacturers and the ongoing China EV price war.
Adding to the sector’s policy overhang is the anticipated implementation of OMV duties, expected to take effect in 2026, said RHB Research in a separate note on Wednesday.
These duties would revise the tax calculation for CBU vehicles, potentially raising vehicle prices — particularly for imported models, including EVs.
To date, the full details of the OMV framework have yet to be announced, while analysts believe that could lead to higher future prices causing front-loaded demand in late 2025, helping support TIV momentum heading into the fourth quarter.
EV sales climb, but affordability and policy remain wild cards
On EVs, analysts flagged that adoption of vehicles that are either partially or fully powered by electricity still faces affordability constraints, especially with the majority of Chinese CBU models currently priced beyond mass-market levels.
“Public transport may gain traction as an alternative, but much will depend on how the policy is executed,” said RHB Research in a separate note on Wednesday, referring to the government’s planned RON95 fuel subsidy rationalisation.
Analysts expect the move could accelerate EV interest or cause downtrading to more fuel-efficient internal combustion engine models, especially among middle-income consumers.
The uptake for EVs has shown a gradual rise in terms of the number of registrations, which went up 44% m-o-m to 4,152 units in May, according to Road Transport Department (JPJ) data. The growth was supported by stronger sales across both premium and mid-tier brands, amid aggressive pricing strategies from Chinese automakers.
As of March 2025, there were 4,161 public chargers nationwide. To hit the 10,000-unit goal by end-2025, monthly installations must exceed 830 units.
On strategy, both BIMB and RHB Research maintain a neutral view on the automotive sector, citing mixed catalysts and lingering macroeconomic headwinds. Only Sime Darby Bhd (KL:SIME) has the sole "buy" call in the sector by RHB Research.