KUALA LUMPUR: The total industry volume (TIV) of Malaysia's automotive sector is projected to see marginal growth, reaching 805,000 units in the calendar year 2025 (CY25), according to Kenanga Research.
TIV is estimated to reach 800,000 units in CY24.
The firm attributed the growth to an increased share of the volume-driven affordable segment and attractive new model launches replacing older versions.
A shift by mid-market buyers towards more budget-friendly, fuel-efficient options is also expected following the rationalisation of fuel subsidies.
Kenanga also highlighted the growing market share of Chinese automakers, supported by localisation initiatives.
According to Kenanga, a two-tier automotive market is expected to continue locally in CY25.
They add that the affordable segment is likely to remain stable, as its primary customers, the Bottom 40 (B40) group and lower-tier Middle 40 (M40) group, are anticipated to be unaffected by the upcoming fuel subsidy rationalisation and may even benefit from the implementation of the progressive wage model.
"We also expect another deferment of new excise duty regulations, which could have raised the prices of locally assembled vehicles by 8 per cent to 20 per cent, with an official announcement expected by the end of 2024 to prevent a sudden inflation spike, especially as the RON95 fuel subsidy rationalisation is set for June 2025."
"Additionally, factors such as higher household incomes from government salary hikes starting in December 2024, increased minimum wages in January 2025, and a stable labor market (projected at 3.2 per cent unemployment in CY25 compared to 3.3 per cent in CY24) are expected to sustain vehicle demand for another record-breaking year," it added.
Kenanga noted that the outlook is less favourable for the premium segment, as its target customers—the upper-tier M40 and T15 groups—may delay purchasing new cars, opt for smaller vehicles, or transition to hybrids and electric vehicles (EVs) to reduce fuel expenses once fuel subsidy rationalization is implemented.
In general, Kenanga said the automotive industry's earnings visibility is good, backed by a booking backlog of 150,000 units as at end December 2024.
"More than half of the backlog is made up of new models, alluding to the appeal of new models to car buyers. This trend is likely to persist throughout CY25 given a strong line-up of new launches," it added.
The firm added that vehicle sales will also be supported by new battery electric vehicles (BEVs) that enjoy sales and service tax (SST) exemption and other EV facilities incentives up until CY25 for complete built-up (CBUs) and CY27 for completely knocked down (CKDs).
The new registration for BEVs leapt from 274 units in CY21 to over 3,400 units in CY22, 10,159 units in CY23, and almost 16,000 units for nine month calendar year 2024 (9MCY24), or 3 per cent of TIV.
"We expect more favourable incentives from the government which has set a national target for EVs and hybrid vehicles of 15 per cent of TIV by calendar year 2030 (CY30) and 38 per cent by calendar year 2040 (CY40)."
"Meanwhile, the government will speed up the approval for charging stations. The number of proposed charging stations is currently at 4,235 (3,354 built to date) and this should more than double to 10,000 by end-CY25," it said.
Kenanga has assigned an 'Overweight' rating to the sector, selecting Hong Leong Industries Bhd and MBM Resources Bhd as its top picks.