Solid rebound in March

PETALING JAYA: Analysts are choosing to remain neutral on the automotive sector in Malaysia despite the total industry volume (TIV) increasing 11.7% month-on-month (m-o-m) in March this year, and 2.1% year-on-year (y-o-y) to 72,700 units.

The Malaysian Automotive Association (MAA) said the increase was supported by a solid rebound in both passenger and commercial vehicles.

The association opined the stronger sales were on the back of Hari Raya spending, and attractive promotional campaigns by automakers.

But a dip in volume sales is expected.

In a report, TA Research said even with the positive momentum, the total TIV for the first quarter (1Q25) declined by 7.4% y-o-y to 188,100 units, with passenger vehicle sales falling by 5% and commercial vehicle sales by 32.9%, highlighting persistent weakness in the overall demand.

According to the research house, Perusahaan Otomobil Kedua Sdn Bhd’s (Perodua) and Proton Holdings Bhd showed m-o-m improvement, but challenges for the overall market persists particularly for commercial vehicles and certain non-national brands.

“This suggests that the industry would face ongoing pressure to sustain growth in 2025. We maintain our ‘neutral’ recommendation for the automotive sector and reiterate our 2025 TIV forecast of 700,000 units,” it said.

TA Research said it will maintain a “sell” call on MBM Resources Bhd with a target price (TP) of RM5.14 per share, and Bermaz Auto Bhd with a TP of RM0.94.

However, Sime Darby Bhd is still rated as a “hold” with a TP of RM2.35.

Similarly, RHB Investment Bank Bhd said maintainied a “neutral” outlook on the sector, noting that the 1Q25 TIV was in line with its 2025 forecast of 730,000 units, making up 25.8% of its full-year assumption.

For 2Q25, it anticipates TIV to be weaker due to the festivities as well as the factory maintenance for Perodua and Proton.

“We remain cautious in our outlook due to the ongoing price competition in the non-national segment and softening order backlogs.

“We maintain our “neutral” sector call given our expectations for a cyclical slowdown of the sector premised on a lack of catalysts to drive sales and earnings to a new high,” RHB Investment said.

It said Sime Darby will be its top pick for its strategic position that is able to withstand the impact of the impending RON95 subsidy removal, on top of its exposure in Malaysia’s most popular car brand, Perodua.

It also opined that the electric vehicle (EV) segment will remain small and not have a meaningful impact on TIV.

“EVs are gaining traction, but two main hurdles stand in the way, namely high pricing – driven by the RM100,000 price floor on fully-imported EVs – and the lack of adequate charging infrastructure,” it said.

In its report, RHB Investment Bank Bhd quoted MAA, saying just 2.9% of total TIV in the 1Q25 of financial year 2025 were made up of EVs.

“EV car registrations including non-MAA members in 1Q25 jumped 46% y-o-y to 6,827 units. This made up 3.4% of total cars registered during the quarter, from 2.5% in 2024.”

The research house said key downside risks for the sector included softer-than-expected orders and deliveries, and resurgent supply chain issues, while the opposite represents the upside risks.

Meanwhile, Kenanga Research said it has maintained an “overweight” call on the sector as the 1Q25 TIV made up 23% of its full-year projection of 850,000 units.

“Our 2025 TIV projection is a tad above the forecast of 780,000 by MAA, backed by strong sustained demand in the affordable segment, attractive new launches and a downtrading trend by mid-market buyers.”