PETALING JAYA: The automotive sector earnings are projected to remain under pressure in 2026, on the back of lower sales volumes and rising operating costs due to intensified promotional efforts.
The impact will be largely cushioned by a stronger ringgit against the US dollar and yen, said Hong Leong Investment Bank (HLIB) Research.
“Order backlogs remained strong amidst strong demand for national marques,’’ HLIB Research adds.
For 2026, HLIB Research expects total industry volume (TIV) to normalise down to 780,000 units.
TIV declined to 52,400 units in February 2026, mainly due to the shorter working month on long Chinese New Year holidays.
Year-to-date, TIV was 116,700 units, a marginal improvement of 0.7% year-on-year, driven by strong Proton sales, offset by weaker Perodua and Japanese original equipment manufacturer.
Its top picks for the sector are MBM Resources Bhd
, for which it has a “buy” call with a target price (TP) of RM7.10 a share, and Sime Darby Bhd (“buy”, TP: RM2.85 a share).
“MBM benefits from its strong exposure to Perodua.
“Sime Darby is supported by sustained strength in its industrial segment (particularly in Australia), recovering China motor division, and stronger contribution from Sime UMW across all sub-segments.
“Both MBM and Sime Darby also offer attractive dividend yields of 5% to 7%,’’ HLIB Research said.
Total EV sales were 9,900 units, making up 8.5% of TIV, largely driven by the newly launched Proton eMas 5.
“We expect national marques to maintain their sales momentum in 2026, while non-national marques may continue to face pressure amid intensifying competition from new entrants offering more competitive pricing, refreshed designs, and enhanced product features,’’ HLIB Research said.
“Top-selling models included the Atto 3 (558 units), Seal 6 (305 units) and the Sealion 7 (303 units),’’ the research house said.
Despite the ending of excise duty exemptions for electric vehicle cars by end 2025, BYD is still maintaining its selling prices for the starting of 2026.
BYD Malaysia is planning for a completely-knock-down plant in Tanjung Malim, Perak, with local production set to begin by the second half of 2026.
Perodua (Sime Darby and MBM) achieved sales of 23,600 units in February 2026, and management expects Perodua sales to sustain in 2026.
Proton has now set its 2026 sales target at 200,000 units, and it achieved 160,000 units in 2025.
Proton is also seen as a beneficiary of the government’s RM4,000 grant for car scrapping programme.
“Despite a slow start, Toyota (Sime Darby) still retained its leadership in the foreign segment, selling 4,800 in February 2026,’’ HLIB Research said.
Honda has set a lower sales target of 60,000 units for 2026, with six new launches in the pipeline, including expanding hybrid offerings.
Honda resumed its aggressive price discounting campaigns at the start of 2026 with discounts of up to RM60,000 for 2025 models and RM11,000 for 2026 models.
As for Mazda (Bermaz Auto Bhd), the all new Mazda CX-5 is only expected to come onshore by the third quarter of 2026.
Nissan (Tan Chong Motor Holdings Bhd) sales were also affected by the ongoing global restructuring of the Nissan Group, which continues to weigh on local operations.
Nissan is expected to launch the new generation Serena C28 e-Power in March 2026.
