Market for vehicles to stay in ‘two-speed’ mode

PETALING JAYA: The local automotive market is expected to continue operating in a “two-speed” mode for the rest of the year, with the affordable segment remaining resilient, while the premium segment faces headwinds, according to Kenanga Research.

The research house forecasts total vehicle sales, also known as total industry volume (TIV), will reach 805,000 units this year, representing a slight decline of 1% year-on-year (y-o-y).

In its latest report on the automotive industry, the research house attributed this to “forward buying interest on the deferment of new excise duty regulations,” with Perodua likely to be the biggest beneficiary.

“We expect Perodua to benefit the most, at 44% market share of TIV as well as attractive new launches such as a hybrid, an electric vehicle (EV) and all-new Myvi model,” Kenanga Research noted.

The research house also pointed to stronger purchasing power among lower and middle-income households as a key driver for vehicle sales.

It cited factors such as higher household income through the salary hike for government servants last December , and higher minimum wages that came into effect last month and a stable labour market.

Conversely, the premium vehicle market could see slower sales as higher-income consumers adapt to the government’s impending rationalisation of fuel subsidies.

Kenanga Research highlighted that upper-tier households might hold back from buying new cars, trade down to smaller cars or switch to hybrids and EVs to cut their fuel bills, upon the introduction of fuel-subsidy rationalisation.

It expects EVs sales to see continued growth, supported by government incentives such as the ongoing sales and service tax (SST) exemption and other EV incentives for completely-built-ups (CBU) and 2027 for completely-knocked-down (CKD).”

The number of new EVs registered in Malaysia has surged in recent years, rising from 274 units in 2021 to 21,789 units last year, or about 3% of total vehicle sales.

“We expect more favourable incentives from the government which has set a national target for EVs and hybrid vehicles of 20% of TIV by 2030 and 38% by 2040. Meanwhile, the government will speed up the approval for charging stations,” the research house said.

Currently, 3,611 charging stations have been built, with plans to increase the number to 10,000 by the end of this year.

Kenanga Research also noted that there was a sharp 31% month-on-month (m-o-m) increase in vehicle sales to 63,906 units last month, driven by pre-Hari Raya purchases.

However, year-on-year sales declined by 2%, largely due to a significant decline in commercial-segment sales, which saw a decline of 24%, following the rationalisation of the diesel subsidy last June.

The reduction of subsidies for diesel also affected the pick-up truck market.

The Malaysian Automotive Association (MAA) recently reported that total vehicle sales for the first two months of this year reached 113,056 units, down 14% from 131,938 units in the same period last year

“With TIV for the first two months of the year making up 14% of our full-year projection of 805,000 units, we consider the number as meeting our expectation. For comparison, the same period last year made up 16% of full-year TIV,” Kenanga Research said.