KUALA LUMPUR: Malaysia's automotive sector may navigate a challenging landscape in 2025, driven by potential policy changes such as the removal of the RON95 petrol subsidy and revisions to the open market value (OMV) calculation, according to CIMB Research.
The Malaysian Automotive Association (MAA) has projected that adjustments to OMV could increase the average selling prices of locally assembled vehicles by 8–20 per cent.
CIMB Securities warns that higher car prices could dampen consumer demand, with total industry volume (TIV) expected to decline by 4.0 per cent to 755,000 units, down from 790,000 units in 2024.
Consequently, the firm has downgraded its sector rating from "Overweight" to "Neutral," citing subdued growth prospects amid intensifying competition.
Despite these headwinds, CIMB highlights opportunities within the sector, particularly in the adoption of battery electric vehicles (BEVs).
It said that the removal of the RON95 subsidy could act as a catalyst for BEV growth.
Sime Darby Bhd is expected to benefit significantly, leveraging its expanding EV portfolio, which includes BMW, Mini, Porsche, BYD, and Volvo.
"We anticipate higher BEV adoption in 2025, driven by new model launches, new entrants, and rising competition among EV players ahead of the duty exemptions for imported models ending in 2026, after which domestic assembly will take precedence," it said.
The firm said that demand for national brands such as Proton and Perodua is expected to remain strong, supported by first-time buyers and the affordability of mass-market vehicles.
Government plans under the 2025 Budget to retain subsidies for 85 per cent of RON95 users are expected to further bolster the dominance of national brands, which are projected to capture 65 per cent of the market share, compared to 35 per cent for non-national brands.
CIMB Research forecasts a modest recovery in sector earnings, with a net profit growth of 3.0 per cent in 2025 following a sharp 23 per cent contraction in 2024.
Growth will likely be led by Sime Darby, driven by contributions from UMW Holdings Bhd, increased equipment sales and rentals, and a turnaround in its China motors division amid economic recovery and improved cost management.
Several factors could further improve the sector's prospects, including a stronger ringgit, lower interest rates, and supportive government policies.
"Key catalysts include the strengthening of the ringgit against the US dollar and yen, alongside a reduction in interest rates," CIMB Securities said.
However, risks remain, it said, addinfg that a weaker ringgit, higher interest rates, or dampened consumer sentiment due to subsidy rationalisation and new taxes could negatively impact the sector.
Despite the challenges, CIMB Securities noted the sector's appealing dividend yield of 6.3 per cent for 2024–2025, providing a potential silver lining for investors.