PETALING JAYA: The automotive market in Malaysia has remained relatively insulated despite rising fuel prices stemming from the Middle East conflict and reduced traffic through the Strait of Hormuz.
Kenanga Research said the government’s subsidised RON95 petrol price of RM1.99 per litre under Budi95 has helped support the industry.
Furthermore, changing vehicle replacement trends – including growing adoption of electric vehicles (EVs) and hybrids, as well as a shift towards motorcycles – could help mitigate the impact of potential removal of subsidies.
In a report, the research house said it remains “neutral” on the sector, projecting a total industry volume (TIV) of 790,000 units in 2026, representing a 4% year-on-year decline.
The forecast is in line with the Malaysian Automotive Association’s projection.
Kenanga Research said its TIV forecast incorporates a growing trend of rebates offered by automakers to capture market share.
The brokerage believes manufacturers are increasingly moving beyond discount-driven competition by focusing on higher-margin segments.
It said the rising market share of Chinese automakers, supported by the vehicle production localisation programme, is also a factor behind its lower TIV target.
“Other factors include sustained demand in the affordable segment, with national marques remaining as the market leader, and new hire purchase loan policies designed to create a fairer lending environment,” it said.
Overall, the research house noted that the industry’s earnings visibility remains strong, backed by a booked order backlog of 205,000 units as at end-February, largely supported by the introduction of the new Proton Saga model.
Kenanga Research’s top picks include Bermaz Auto Bhd
and Hong Leong Industries Bhd.
Meanwhile, RHB Research expects sales to pick up in the second half of the year, underpinned by new model launches including the Proton e.MAS 7 Premium Plus EV, BYD Atto 3 and Mazda CX-5.
It highlighted that for EV’s, Proton was the top-selling brand in May 2026, while Toyota recorded a 9% month-on-month increase driven by the recent launch of the Yaris Cross.
“While peace talks between the United States and Iran are ongoing, we may see some near-term demand weakness related to a wait-and-see approach from consumers as inflation slowly rises,” it said.
RHB Research recently raised its 2026 headline inflation forecast to 2.1% from 1.8%, citing concerns over cost-push pressures in the coming months that could weigh on discretionary purchases.
It has kept its “neutral” call on the sector but remains cautious due to policy uncertainties, potential inflationary pressures that could dampen demand, and a softening car replacement cycle, following four consecutive years of record-high TIV.
“Key downside risks include softer- than-expected orders and intense price competition,” it added.
