PETALING JAYA: Analysts are projecting a smaller decline in year-on-year (y-o-y) car sales for 2026 compared with the Malaysian Automotive Association (MAA), driven by a pick-up in demand for vehicles towards the latter part of the year.
The MAA has forecast a 3.8% y-o-y decline in total industry volume (TIV) to 790,000 units in 2026, citing demand normalisation following front-loaded completely built-up electric vehicle (EV) purchases ahead of the expiry of the tax exemption, as well as inflationary pressures from higher living costs.
However, CIMB Research is a little more optimistic.
“We forecast a narrower 2.5% y-o-y decline in TIV to 800,000 units in 2026, following an upward revision from 774,000 units, driven by stronger-than-expected December sales and improved clarity on the open market value (OMV) excise duty framework,” it stated in a sector report.
“Our revised view is underpinned by clearer policy signals following the implementation of the Budi95 petrol subsidy programme and confirmation that the OMV revision will not result in immediate price increases.”
The auto industry had been bracing for potential price hikes amid concerns over higher excise duties under the revised OMV calculation methodology.
CIMB Research stated the removal of this overhang as supportive of new vehicle sales this year.
It added demand in the sub-RM100,000 segment to remain resilient, supported by national brands and select entry-level Japanese models.
This will be supported by a positive backdrop, with Bank Negara Malaysia expected to maintain an accommodative interest rate stance to support domestic economic growth, which will help underpin auto demand.
“We project national marques to register modest volume growth of 1.3% y-o-y in 2026 (versus. 1.1% in 2025),” CIMB Research forecast.
Aggressive year-end promotional campaigns by non-national automotive players had a significant impact on automotive sales in December 2025.
TIV jumped 23% month-on-month (m-o-m) to a new monthly record of 90,716 units in the month, with the non-national segment enjoying a sales volume rise of 49.4% m-o-m.
Passenger vehicle and commercial vehicle sales increased by 21.7% and 45.5% m-o-m, respectively, in December.
CIMB Research noted the strong sales performance was also partly due to front-loaded EV purchases ahead of the expiry of the completely built-up EV tax exemption on Jan 1, 2026.
Meanwhile, total production volume grew at a more moderate pace of 7% m-o-m to 67,177 units.
The strong December performance meant TIV in 2025 grew 0.2% y-o-y to a record of 820,752 units and saw Malaysia emerge as the largest automotive market in Asean for the first time, ahead of Indonesia.
Meanwhile, hybrid and battery EV (BEV) sales accounted for 8.5% of TIV in 2025, up from 5.6% in 2024.
Data from the Road Transport Department showed that total EV registrations in the country rose 104% y-o-y to 57,236 units in 2025, with BYD, Proton and Tesla the top three EV brands, collectively accounting for about 53% of the EV market share.
CIMB Research expects national makes to command a higher share of BEV sales in 2026, supported by the launch of Proton’s e.MAS 5 in November and Perodua’s QV-E in December and the fact that locally assembled EVs will continue to enjoy tax exemptions until 2027.
CIMB Research maintained a “neutral” rating on the sector given the lower growth outlook amid intensifying market competition.
“The sector is currently trading at 10.8 times the weighted average 2026 price-to-earnings multiple, which is slightly below the five-year mean of 11.3 times,” the research house added.
“While this valuation discount reflects muted earnings growth prospects in a highly competitive environment, the sector continues to offer attractive dividend yields of 6.6% to 6.9% for 2026 to 2027.”
