PETALING JAYA: Malaysia’s automotive sector is likely headed for another strong year, with robust vehicle sales in the first four months of financial year 2026 (4M26) raising hopes that full-year sales will again defy expectations of a decline amid macroeconomic challenges.
The Malaysia Automotive Association expects total industry volume (TIV) to ease 3.75% to 790,000 units this year from the record 820,752 units achieved in 2025.
However, early-year performance suggests otherwise.
One industry observer said vehicle demand remains robust, supported by stable interest rates, easy access to financing, a resilient labour market and continued fuel subsidies.
“If not another record year, it will not be very far from it,” he told StarBiz.
“It will either be slightly below last year’s numbers or may even exceed them by a bit.
“We can hit another record year provided the status quo remains.”
His optimism is underpinned by the industry’s performance so far this year, with TIV rising 1.8% year-on-year (y-o-y) to 254,226 units in 4M26.
The growth came amid lingering uncertainty over policy changes, including the revised open market value excise duty calculation for locally assembled (CKD) vehicles, scheduled to take effect after June 30, 2026 following several deferments.
Under the revised framework, non-manufacturing costs such as marketing expenses, administrative overheads and profit margins will be included in vehicle valuation, potentially leading to higher prices.
Nevertheless, the industry observer said the strong start to the year suggests consumer demand for vehicles remains resilient despite geopolitical uncertainties and concerns over consumer spending.
According to him, there is currently little to discourage Malaysians from purchasing cars.
“The government has done a good job cushioning inflationary pressures through subsidies, particularly for RON95 petrol. Interest rates remain stable, financing is readily available and the job market is still strong.
“Unless fuel subsidies are reduced, interest rates rise or employment conditions weaken, there is no major drag on car-buying activity.”
He added that the affordable vehicle segment continues to be the main driver of industry volume and remains most sensitive to macroeconomic shifts.
Among automakers, Proton Holdings Bhd continued to gain ground, recording sales of 67,298 units in 4M26, up 40.9% from a year earlier.
Meanwhile, Perodua registered 106,298 vehicles over the same period, down 5.5% y-o-y, according to Road Transport Department (JPJ) data.
The industry observer attributed Proton’s performance largely to the strong reception of the new Saga.
“The new Proton Saga has proven to be a huge hit with buyers and is drawing customers away from Perodua’s bread-and-butter models,” he said.
JPJ data showed the Proton Saga was the country’s second best-selling model in 4M26, with 29,897 registrations up 46.3% y-o-y, only behind Perodua Bezza’s 32,386, which was up 2.9% y-o-y.
Among non-national marques, UMW Toyota Motor Sdn Bhd sold 21,924 vehicles in 4M26, down 21.4% from 27,876 units a year earlier.
Meanwhile, in the electric vehicle (EV) market, attention has now turned to changes in Malaysia’s EV policy framework, which takes effect on July 1.
Under the revised rules, fully imported (CBU) EVs entering Malaysia must meet a minimum cost, insurance and freight value of RM200,000 and a minimum power output of 180kW.
The move is widely seen as an effort to encourage automakers to establish local assembly operations in Malaysia instead of relying on imported vehicles.
Locally assembled (CKD) EVs will continue to enjoy incentives including excise duty and sales tax exemptions as well as import duty exemptions on components until end-2027.
While welcoming the policy changes, the Electric Vehicle Association of Malaysia (EVAM) said greater emphasis should now be placed on technology transfer and the development of a domestic EV supply chain.
EVAM president Datuk Dennis Chuah said the lack of technology transfer has limited high-value job creation in the sector.
“Malaysians do not have skilled job opportunities in the EV industry. The opportunities are mostly in marketing and sales. Even in a service centre, you are not learning to diagnose the problem,” he said.
He also stressed that CKD assembly must go beyond repackaging imported components, noting that stronger local content requirements would be crucial to building a meaningful domestic ecosystem.
Without deeper localisation, he warned Malaysia risks remaining an assembly hub with limited spillover benefits to local suppliers and manufacturers.
Chuah said the previous CBU tax holiday framework had led to an influx of new entrants, particularly Chinese brands, introducing a large number of EV models into the market.
However, he said this has created issues around scale, after-sales sustainability and supply chain viability.
“In five years’ time, consumers may struggle to get spare parts. Even now, we are already seeing cases where three-year-old vehicles have limited parts availability,” he explained.
He contrasted this with internal combustion engine (ICE) vehicles, where parts for decades-old models remain accessible due to established supply chains and higher production volumes.
He said Malaysia should focus on concentrating volumes into fewer models to encourage EV ecosystem development.
“If we narrow it down to maybe 10 to 15 core models and build volume around them, then it becomes viable to localise production and encourage parts manufacturing here,” he said.
“With high volume, our manufacturers would consider investing.”
Nevertheless, Chuah does not expect the new policy to materially dent EV adoption, noting that EVs still offer lower total cost of ownership compared with ICE vehicles.
He also expects demand to remain supported by a reduction in subsidised Ron95 quotas and growing consumer acceptance of EV technology.
“Sales will continue increasing month by month,” he said.
“Even if there are fewer models after July, the remaining models will enjoy stronger volumes.”
However, he cautioned that Malaysia must address infrastructure gaps as adoption rises.
“The only concern now is whether our charging infrastructure is capable of handling demand, especially for those living in apartments and condominiums.”
For 4M26, total EV registrations reached 20,485 units, a 110.8% increase compared to 9,719 units recorded in the same period last year, according to JPJ.
