3 days ago
Vehicle sales forecast to be more subdued for 2H
PETALING JAYA: The automotive industry appears set for a more subdued second half of the year (2H25), on the back of persistent margin pressures, moderating demand and fierce price competition, analysts say.
Resilient national marques, particularly Perodua, are expected to provide support for overall volumes amid evolving regulatory and economic landscapes.
Hong Leong Investment Bank Research (HLIB Research) upgraded total industry volume (TIV) forecast for this year to 770,000 units from 750,000, citing Perodua's continued sales strength.
'We expect 2H25 TIV to be sustained, supported mainly by Perodua's sales deliveries to clear the current backlog of 100,000 orders and the still healthy new order intake,' HLIB Research noted.
Perodua's market share, affordability and localisation initiatives positioned it to weather broader sector challenges, the research house added.
HLIB Research projects 345,000 units in sales for national carmakera this year, as order backlogs, while easing to about 120,000 to 130,000 units overall, remained Perodua-heavy.
However, it also warned that margins are to come under pressure due to intensifying competition across the market.
Kenanga Research maintained a higher TIV forecast of 805,000 units for the year, attributing the optimism to forward-buying interest on the deferment of new excise duty regulations to the end of this year, as well as improved household incomes and continued demand in the affordable segment.
'We expect Perodua to benefit the most, at 44% TIV market share, with the highest localisation rate,' the research house said.
That said, a different picture is emerging in the premium-car market, Kenanga Research said.
The research house cautioned that rationalisation of fuel subsidies, rising utility costs and shifting consumer priorities may push high-income buyers to either delay purchases or switch to hybrids and electric vehicles (EVs).
'The target customers in the premium segment may hold back from buying new cars, opt for smaller cars or switch to hybrids and EVs,' it said.
EV adoption continued to be a focal point for the industry, with all research houses closely monitoring the segment.
According to BIMB Research, Malaysia's EV registrations dropped 21% month-on-month (m-o-m) in June to 3,272 units, largely due to normalisation after a string of launches.
'Tesla led the pullback (down 45% m-o-m to 587 units), while BYD remained the top seller with 1,045 units,' the research house said, adding that penetration edged up to just 4.3%, which was well below the government's 20% target by 2030.
BIMB Research also flagged affordability concerns and slow infrastructure deployment as part of the slowdown.
'Affordability challenges and aggressive pricing from Chinese original equipment manufacturers (OEMs) continue to pressure margins and sentiment. Elevated borrowing costs and slow EV infrastructure rollouts add to headwinds,' it said.
RHB Research offered a more guarded tone, maintaining its TIV projection at 730,000 units, citing diminishing order backlogs and waning post-pandemic demand.
'After three record-breaking years, we do not see any exciting catalysts for auto sales this year to be maintained at the current elevated levels,' it said.
The research house pointed to falling loan approval rates, now at 55% year-to-date versus 58% to 63% from 2022 to 2024, and mounting inflationary pressures that may prompt buyers to hold off amid anticipated price cuts.
'The influx of new models, coupled with aggressive price discounting has created a highly competitive environment,' RHB Research said.
Looking ahead, regulatory shifts are expected to shape industry dynamics. HLIB Researchy noted that the New Customised Incentive Mechanism (NCM), due by the fourth quarter of this year, would replace the Industrial Linkage Programme and offer a more structured, 'menu-based' incentive framework encouraging localisation, EV development and research and development.
'NCM is being structured to encourage OEMs to expand localisation at the local-vendor level,' the research house said.
Meanwhile, the implementation of the revised open market value-based excise duty structure has been deferred for the fourth time, is now set for implementation by January 2026.
However, RHB Research said it believes that the 10% to 30% hike in vehicle prices once the new duty structure in implemented is 'unlikely to happen', though pressure on the supply chain remains with only five months left before the policy kicks in.
All four research houses maintained a 'neutral' stance on the sector.
