PETALING JAYA: The automotive sector’s earnings delivery saw a strong recovery boost from robust year-end sales promotions in the recently concluded fourth quarter of financial year 2025 results season.
Kenanga Research said its thesis for 2026 total industry volume (TIV) encompasses a new trend of discounts or rebates provided for new model launches as a strategy to gain a headstart in capturing market share.
This will come likely at the expense of margins, it told clients in a report.
Kenanga Research said it expected a gradual transition to battery electric vehicles (BEVs) which currently enjoys tax exemption up until 2027 for locally-assembled complete knock downs.
“Looking further, the research house also has a balanced view of electric vehicle (EV) adoption eventually picking up and petrol vehicles demand will also eventually peak, but we do not think that will happen in the next five years due to infrastructure challenges,” it said.
It noted that the new petrol subsidy mechanism, could make the transition even slower than earlier expected as the middle- and lower- income groups now have less incentive to switch from internal combustion engine to EV for the time being.
It pointed out that new registration for BEVs leapt from 274 units in 2021 to over 3,400 units in 2022, 13,301 units in 2023, 21,789 units in 2024 and 44,800 units in 2025, or 5.5% of TIV.
“Malaysia aims for EVs to represent 20% of new vehicle sales by 2030, with longer-term vision extends to 80% by 2050 (including hybrids vehicles).
“The government is currently focused on building out the EV ecosystem, including establishing 10,000 public charging points (no updated timeline target yet from the earlier by 2025, despite the current build-to-date lagging behind with just tad above 50% of the target) with current number of proposed charging stations currently at 4,477 (5,149 built-to-date) and providing tax incentives to stimulate adoption and local production,” it noted.
Kenanga Research is maintaining its “neutral” stance on the sector, with sector picks being Bermaz Auto Bhd
due to its strong near-term earnings visibility, backed by a total order backlog of 3,500 units.
The other pick is Hong Leong Industries Bhd, as it is a strong proxy to the booming gig economy given the critical role of motorised two-wheelers in executing online delivery transactions.
The company is associated with the strong Yamaha motorcycle brand in Malaysia and has a solid war chest with a net cash of RM2bil that could be deployed for earnings-accretive acquisitions.
