EVs set to catalyse local automotive scene

PETALING JAYA: Competition in the automotive sector is expected to heat up as Malaysia aims to raise electric vehicle (EV) adoption to 15% of total industry volume (TIV) by 2030 compared with 5% as of September 2024.

According to Affin Hwang Investment Bank Research (Affin Hwang Research), advancements in battery technology and safety, advanced EV safety features and transition to a low-carbon economy have resulted in greater motivation to adopt EVs.

By 2025, it expects EV adoption to rise to 80% compared with the current adoption of 5% or 33,319 units of TIV as at September this year.

“Domestically, we expect heightened competition in the EV space, with lower prices in the coming years driven by an influx of new brands and aggressive competition from existing players,” the research house said in a report after hosting the Affin EV Day event recently.

There are challenges ahead though.

The research house said that to-date, general insurers have not been able to accurately establish the cost of the EV battery because the EV industry is being heavily subsidised.

The battery, which is the most critical component of an EV, is also one of the factors determining risk assessment and structuring of an EV policy.

The risk assessment is being made more complex as even minor damage to an EV battery pack may require a full replacement.

“As such, EV insurance premiums are inevitably priced 20% to 30% higher as the industry continues to gather individual driving insights and behaviour, as well as statistics on accidents,” research house said.

It added solid state batteries could be a game changer with positive environmental, social, and governance impact.

Most EVs today use lithium-ion batteries or similar technologies, which feature a liquid electrolyte.

Solid-state batteries, as their name implies, replaces this with a solid electrolyte.

“This shift is expected to bring several benefits, including higher power density, improved safety and lower overall costs for batteries, while significantly reducing environmental impact and thereby lowering carbon footprints.”

In the auto sector, Affin Hwang Research said is it more positive on MBM Resources Bhd due to the group’s diverse EV dealerships and being poised to benefit from its associate, Perusahaan Otomobil Kedua Sdn Bhd (Perodua) as a market leader.

“The spotlight on EVs is expected to grow, especially as traditional original equipment manufacturers face challenges from the upcoming subsidy rationalisation for RON95 petrol that may negatively impact internal combustion engine vehicles.

“Perodua’s introduction of its first EV priced under RM100,000 is poised to be a game changer, targeting first-time EV users in the B40 and M40 demographic segments,” said the research house.

It added that ongoing tax exemptions for both completely-built-up and completely-knocked-down EVs, along with the influx of competitive new EV brands in Malaysia, will drive demand.

In the insurance segment, it likes Allianz Malaysia Bhd for its extensive distribution network and high contractual service margin of RM3.45bil.

Allianz is currently the market leader in Malaysia’s motor insurance market, with a share of 23%.