PETALING JAYA: Malaysia’s automotive market is showing signs of resilience at the start of 2026, but analysts warn that volumes are increasingly being propped up by aggressive discounting, raising concerns over margins as the industry enters a normalisation phase.
Strong year-on-year (y-o-y) growth is masking softer month-on-month (m-o-m) momentum as delivery pipelines unwind from the December 2025 surge.
BIMB Research said total industry volumes (TIV) are expected to ease this year as post-year-end deliveries normalise.
“We expect industry volumes to moderate in 2026 following the December 2025 delivery surge, with normalising pipelines already evident in January 2026’s sharp month-on-month (m-o-m) decline,” BIMB Research said in a note.
Last month’s data showed TIV falling 29.1% m-o-m to 64,298 units, reversing December’s year-end surge.
BIMB Research said the decline reflects typical seasonality after year-end registrations, compounded by the unwinding backlog of deliveries.
On a y-o-y basis, however, volumes were still up 28.7%, reflecting low base effects and resilient underlying demand.
“The data suggests market transitions from a front-loaded delivery cycle to a more normalised monthly run rate,” BIMB Research said, adding that policy recalibration, cost normalisation and changes to incentives point to a more sustainable replacement cycle, rather than continued cyclical expansion.
The research house also noted that the proposed revision to open market value (OMV)-based excise duties for completely knocked down (CKD) vehicles from July 2026 is viewed as manageable by the Malaysian Automotive Association (MAA), with limited pricing disruption.
However, it said affordability could come under marginal pressure if the tax base broadens.
“Meanwhile, the expiry of completely built-up electric vehicle (EV) tax exemptions at end-2025 is redirecting demand toward locally assembled models, with imported EV volumes easing post year-end deliveries.”
Against this backdrop, BIMB Research is maintaining a “conservative” TIV target of about 740,000 units for this year.
“We therefore retain our ‘neutral’ stance on the automotive sector as the industry transitions into a post-push equilibrium.”
National marques continued to anchor the market in January.
Passenger national car sales declined 9.2% m-o-m to 45,878 units, a milder contraction than the broader market, underscoring the defensive nature of mass-market brands, according to BIMB Research.
Still, national players retained a dominant 71.3% market share, led by Perodua with 40.6% and Proton with 30.7%, as consumers remained focused on affordability and value. The non-national segment saw a sharper correction, with volumes sliding 54.2% m-o-m to 18,420 units, reflecting the unwinding of December promotions and delivery bunching.
Separately, Kenanga Research said January’s 29% m-o-m plunge in TIV was within historical norms after purchases were front-loaded into December, while the 29% y-o-y jump reflected spillover from late-2025 model launches.
“The promising TIV start made up 9% of our full-year projection, and is above expectation,” the research house noted.
However, it cautioned that strong early numbers were supported by aggressive discounts and rebates, even for new model launches, as automakers sought to gain an early market share foothold, potentially at the expense of margins.
“Thus, as this new discounting dynamic is likely to keep a lid on the rate of price hike, our earlier forecast of 725,00 units for 2026 TIV now appears conservative,” Kenanga Research said.
The research house has revised its 2026 TIV forecast up to 790,000 units, still down 4% y-o-y from the record high of 820,752 units in 2025, in line with the forecast by the MAA.
Despite the upward revision, Kenanga Research maintained its “neutral” stance on the sector and left earnings forecasts unchanged pending upcoming results announcements.
Kenanga Research’s 2026 outlook factors in continued discount-led competition, the gradual rollout of OMV-based excise duty changes from July, rising localisation of Chinese brands through CKD programmes, sustained demand for affordable vehicles led by national marques, stable labour market conditions and a healthy pipeline of new launches.
Overall, the research outfit said earnings visibility remains supported by a booking backlog of about 140,000 units as at end-January 2026.
“More than half of the backlog is made up of new models, alluding to the appeal of new models to car buyers.”
On EVs, Kenanga Research expects adoption to continue rising, albeit at a gradual pace, supported by tax exemptions for locally assembled battery electric vehicles until 2027, even as structural challenges limit the speed of transition.
“We have a nuanced view of EV adoption eventually picking up and gasoline vehicles demand will eventually peak, but we do not think that will happen in the next five years due to infrastructure challenges,” it said.
The research house also cautioned that the new petrol subsidy mechanism could slow the shift to EVs, particularly among middle- and lower-income groups, as the incentive to move away from internal combustion engine vehicles weakens in the near term.
