Little drive for auto industry
THERE is not much to boost the automotive sector this year, with a challenging business environment likely to continue at least over the near-to mid-term.
Total industry volume (TIV) is expected to slow down on a yearly basis in the second quarter this year, partly due to the record high TIV in 2024 but even then, there is a severe lack of push factor for the sector.
RHB Research analysts say they do not see any compelling catalysts for 2025 auto sales.
“We remain cautious in our outlook, due to the ongoing price competition in the non-national segment and softening order backlogs.”
With tax exemptions for fully imported electric vehicles (EVs) expiring after 2025, there could be a short-term spike in EV sales, but it says the impact on overall TIV would be minimal.
“The local EV market remains modest, accounting for about 2% of total car sales.
“Hence, it is unlikely that a surge in EV demand would materially move the TIV needle.”
There is however more optimism within the national segment – the Perodua and Proton brands.
RHB Research says it will be business as usual for the affordable segment as its target customers, for example the B40 and lower tier M40 groups, will be spared from the effects of the impending RON95 subsidy rationalisation.
That said, Chinese brands are giving the local boys a run for their money.
Reports indicate that Chinese brands saw their market share in Malaysia go from less than 2% in 2023 to over 4% just a year later.
This year, that number is expected to grow to over 5%, thanks to aggressive promotional and price slashing activities by Chinese makes.
Additionally, Chinese EV manufacturers have for some time now been moving their excess capacity into the South-East Asian region, including into Malaysia as China reaches a point of saturation within its EV segment.
Their selling point? Attractive prices.
Chinese brand BYD was the top-selling EV brand in Malaysia last year.
Analysts say the intense competition from Chinese auto makers is increasingly putting pressure on local companies, triggering concerns about aggressive price wars, and the long-term sustainability of car makers here.
KHPT Holdings Bhd, a manufacturer and supplier of auto body parts to Perodua says it remains optimistic about its growth prospects.
Still optimistic
Group managing director Datin Eloise See Hui Pvng says that despite the cautious sentiment, the company is optimistic, thanks to several key factors such as a sustained demand from Perodua and growing momentum from Proton.
Perodua continues to maintain a dominant market share, especially within the affordable vehicle segment.
“Our longstanding relationship and proven reliability as a Tier-1 and Tier-2 supplier positions us to benefit from Perodua’s steady production volumes while Proton, Malaysia’s second-largest automaker, remains committed to expanding its portfolio in the fuel-efficient and EV segments.
“This strategic focus aligns with industry trends and presents opportunities for component suppliers like us.”
She notes that while the market may appear saturated, the industry’s shift toward fuel efficiency, environmental sustainability, and evolving consumer preferences is expected to drive demand.
“Government policies and incentives further support this transformation, offering additional tailwinds to industry players,” she tells StarBiz 7.
The industry will also continue to see the rollout of new models across internal combustion engine, hybrid, and EV platforms.
This diversity in offerings ensures a continuous demand for innovative and high-quality automotive parts, she adds.
Based on the latest data by the Malaysian Automotive Association (MAA), TIV fell to 68,007 units in May, down from the 70,254 units recorded in the same month, a year earlier.
Nevertheless, on a month-on-month basis, TIV was 12.4% higher due to more working days in May compared with April, ongoing strong promotional activities and the delivery of vehicles from bookings made in the first quarter of 2025.
MAA said TIV for June is expected to be lower than May due to a one-week plant shutdown during Hari Raya Aidiladha.
KHPT’s See notes that one of the key challenges for the company is the rising cost of doing business, driven by increases in minimum wages, electricity tariffs, and the gradual removal of RON95 fuel subsidies.
“These developments necessitate greater operational efficiency, automation, and prudent cost management.”
See also points out that the industry’s transition to electric and hybrid vehicles requires significant capital investment in new manufacturing capabilities, research and development, and talent development.
In its report on the automotive sector, Kenanga Research notes that the sector’s recent earnings delivery (versus its expectations) saw yet another disappointment.
The disappointments largely stemmed from intense competition for the non-nationals space, where there is fragmented market share especially for the above RM100,000 space and from other business segments that further weighed down the results, it says.
Kenanga Research’s top picks for the sector is MBM Resources Bhd (MBMR) for its strong earnings visibility backed by an order backlog of Perodua vehicles of 90,000 units.
It is the largest dealer of Perodua vehicles in Malaysia.
The company also has a 23% stake in Perusahaan Otomobil Kedua Sdn Bhd, the producer of Perodua vehicles.
It expects MBMR to benefit from the slew of new launches planned for Perodua, expansion of its dealership offerings through the Jaecoo brand and the “downtrading” trend by buyers which should boost demand for the affordable Perodua brand and the value-for money Jaecoo brand.
It also likes Hong Leong Industries Bhd for its association with the strong Yamaha brand in Malaysia and the brand’s market leader position in the local motorcycle segment .
“It is a strong proxy to the booming gig economy given the critical role of motorised two-wheelers in executing online delivery transactions.”
Hong Leong Industries also has a war chest of RM1.9bil cash that could be deployed for earnings-accretive acquisitions, it adds.