PETALING JAYA: Analysts are mostly cautious on the automotive sector, as the weakness in total industry volume (TIV) is expected to cloud the sector’s outlook moving forward.
The latest statistics by the Malaysian Automotive Association showed that TIV declined to 52,400 units in February from 64,300 units in January this year.
In a report, RHB Research said March TIV will likely soften, dragged by fewer working days due to the festive season.
“We also remain cautious on demand, as sentiment could turn more subdued amid rising crude oil prices over US$110 per barrel,” it added.
Recently, the government increased the petrol and diesel subsidy to RM3.2bil per month, up from RM700mil to keep the prices fixed at RM1.99 and RM2.15 per litre, with petroleum supplies expected to last until May this year.
Additionally, a prolonged war in the Middle East could also lift logistics costs for completely built-up vehicles, driven by higher fuel prices and potential rerouting of shipping lanes.
Furthermore, the research house is also expecting a decline in TIV for the first quarter of 2026 (1Q26), mainly due to fewer working days with two major festive seasons (Lunar New Year and Aidil Fitri).
“As such, a rebound is more likely in 2Q26 as production picks up, coupled with a more supportive macroeconomic backdrop and a lower overnight policy rate,” it added.
RHB Research has maintained a “neutral” call on the sector.
This is driven by a lower TIV assumption of 805,000 units, down 2% year-on-year and the lack of catalysts to push TIV to new highs.
“After four record-breaking years, we may see a softening of the car replacement cycle, posing downside risks for car sales,” it said.
RHB Research, however, has “buy” calls for stocks under its coverage, based on a company-specific thesis instead of sector wide, namely, MBM Resources Bhd
from a valuation angle and Bermaz Auto Bhd (BAuto) from an earnings inflection view.
Looking ahead, TA Research in a report said sales are expected to rebound in March, supported by a full working month and festive demand ahead of Hari Raya Aidilfitri, which should help normalise volumes following February’s seasonal dip.
The brokerage firm, which maintained an “underweight” rating on the sector, has kept its “sell” calls on BAuto with a target price of 84 sen, MBM at RM4.70 and Sime Darby Bhd at RM2.10.
It pointed out that intensifying price competition is expected to weigh on margins, with market share gains likely achieved at the expense of profitability.
For 2026, TA Research forecasts TIV at 750,000 units, representing an 8.6% year-over-year decline.
This reflects weaker replacement demand, fading order backlogs, tighter consumer spending and a more challenging pricing environment amid rising electric and hybrid vehicles penetration.
