Muted growth ahead for auto sector as subsidy reforms loom
KUALA LUMPUR: The automotive sector's growth outlook is expected to remain subdued amid rising market competition, said CIMB Securities Research.
The research house projected a sharper decline in total industry volume (TIV) to 760,000 units in 2025, down seven per cent year-on-year.
It said the sector faces several headwinds, including the potential removal of the RON95 petrol subsidy in mid-2025.
"Despite this, we anticipate resilient demand within the sub-RM100,000 segment, which remains dominated by national brands and select entry-level models from Japanese marques.
"Additionally, the government's plan to retain fuel subsidies for 85 per cent of RON95 users, as outlined in Budget 2025, is expected to maintain affordability for the mass-market segment," it said in a note.
In view of this, CIMB Securities expects national brands to maintain their dominance, capturing a projected 64.5 per cent market share, compared with 35.5 per cent for non-national brands in 2025.
It added the removal of the RON95 petrol subsidy could accelerate the adoption of battery electric vehicles in 2025.
"Among stocks under our coverage, Sime Darby Bhd is well-positioned to benefit from accelerating EV adoption, given its expanding EV portfolio across marques like BMW, Mini, Porsche, BYD, and Volvo.
"However, rising competition within the EV segment, particularly from Chinese players, will likely persist. Duty exemptions for imported electric vehicle (EV) models are set to expire in 2026, after which domestic assembly will take precedence," it said.
CIMB Securities has maintained its 'Neutral' rating on the sector, citing a subdued growth outlook amid intensifying market competition.
While the valuation discount reflects the sector's muted earnings outlook and demand uncertainty tied to the potential removal of the RON95 subsidy, CIMB said the sector still offers attractive CY25–26 dividend yields of 6.9 to 7.1 per cent.
"Sime Darby remains our top sector pick owing to its growing exposure to Australia's mining sector, attractive EV play, exposure to Malaysia's auto market leader Perodua, and potential monetisation of non-core and land bank assets," it added.
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