Hazy Road Ahead For Auto Sector
RHB Investment Bank Bhd (RHB Research) has maintained its NEUTRAL outlook on the Malaysian automotive sector, despite a subdued performance in the first quarter of 2025 (1Q25).
The research house reaffirmed its 2025 total industry volume (TIV) forecast of 730,000 units, citing a lack of catalysts to push sales to new highs. The TIV for March stood at 72,704 units, a 2% increase year-on-year (YoY) and an 11% rise month-on-month (MoM), primarily driven by stronger pre-Aidil Fitri deliveries from major marques such as Proton, Honda, and Toyota. However, 1Q25 recorded a 7.4% YoY decline in TIV, in line with RHB's muted expectations for the sector.
Despite the stronger March performance, the 1Q25 TIV came in 7.4% lower YoY, with total industry volume for the quarter reaching 188,100 units, which was also a 15.5% drop from the previous quarter. The decline was anticipated following a record-breaking TIV in 2024, and RHB Research noted that 1Q25 was a quiet quarter, driven by disappointing sales in January and February.
The research house expects the second quarter to face further challenges with a seasonal dip in sales due to the Aidil Fitri festivities, as well as factory maintenance shutdowns at major automotive plants.
Production volume also experienced a dip, falling 5.7% MoM in March and 13% YoY, largely due to the Ramadan fasting month, which typically slows manufacturing activity. The biggest declines in production came from Perodua, Toyota, and Honda, with Proton being the only marque to see a slight increase in output.
RHB Research projects a continued decline in production for 2Q25, driven by scheduled factory shutdowns and the tapering off of backlogs from major marques.
Electric vehicles (EVs) have seen some traction in 1Q25, with EVs making up 2.9% of total TIV, up from 1.8% in 2024. Data from the Road Transport Department (JPJ) showed a 46% YoY increase in EV car registrations, bringing the total to 6,827 units, or 3.4% of total car registrations in 1Q25, compared to 2.5% in 2024.
However, despite the rise in EV registrations, RHB highlighted two major obstacles to wider EV adoption: high prices, driven by the MYR100,000 price floor on completely built-up (CBU) EVs, and a lack of charging infrastructure. RHB Research remains cautious, as the local EV market share is unlikely to have a meaningful impact on overall TIV in the short term.
Sime Darby remains the research house's top pick within the sector, owing to its strategic positioning to weather challenges such as the anticipated removal of the RON95 subsidy, as well as its exposure to Malaysia's most popular car brand, Perodua. Related
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