RHB Research (RHB) continues to expect a weaker year-on-year (YoY) total industry volume (TIV) performance this year as sales volume normalisation takes place in the second half while policy-related uncertainties persist on top of increased competition in the non-national segment.
“We keep our 2024 TIV assumption of 790k, which implies a 2H TIV decline by 8% YoY. Stay NEUTRAL,” said RHB in the recent Malaysia Sector Update Report.
Overall, RHB thinks Budget 2025 offers no surprises for the automotive sector given the absence of any new incentives including initiatives to encourage the installation of public charging stations. 
As of end-September, there are 3,171 public chargers installed nationwide. This is still a long way to go towards achieving the national target of 10k public charging facilities by 2025.
“We believe the lack of charging stations remains one of the impediments to EV take-up in Malaysia,” said RHB.
No news on import and excise duty exemptions on complete build up (CBU) EVs during Budget 2025, which means the tax holiday for CBU EVs will not get extended beyond end-2025 as RHB expected.
“Hence, we may see policy-induced demand for EVs before the expiry of the tax breaks. Note that for complete knockdown (CKD) EVs, the excise duty and sales tax exemption for CKD EVs will remain in force until end-2027,” said RHB.
In the meantime, Perodua has been in discussion with the Ministry of Investment, Trade and Industry (MITI) to roll out its first EV which will be priced below MYR100k.
“With the recent debut of Proton’s first EV – the e.MAS 7 – along with Perodua’s own EV expected by end 2025, we believe the Government will likely prioritise incentives to encourage the local assembly of CKD EVs,” said RHB.
Competition intensifies in the non-national segment, with an influx of new brands flooding the market mainly the Chinese carmakers.
Heavy price discounting seems to be the popular move among the new entrants resulting in existing brands following suit to defend their market share.
Hence, RHB is aware that some buyers may delay their purchases in anticipation of further price reductions from both existing and new non-national marques, hence destabilising the non-national segment.
While EVs are not spared from the competition with the rise of new models, they remain less popular – this is mainly due to pricing, with the CBUs subject to a MYR100k floor.
“We reiterate that the sector may see moderating sales volumes given the cyclical nature of the automotive business,” said RHB.
Hence, RHB believes quarter four 2024 TIV could soften YoY, given the normalisation of sales backlogs – even though quarter four tends to be a seasonally strong quarter as carmakers push for more sales deliveries before the year’s end.
Perodua may be an exception given its more affordable and value-for-money offerings.
The non-national marques, on the other hand, should continue to face intensifying competition as a result of new entrants.
RHB’s 2024 TIV assumption of 790k remains, which implies a 2H TIV decline by 8% YoY. RHb’s Top Picks are now BAUTO and SIME.
RHB favours BAUTO due to its attractive valuation and higher-than-sector average dividend yield while SIME is well positioned for the RON95 rationalisation with its broad EV line-up, and its stake in Perodua provides earnings protection amidst intensifying competition among the non-national marques.
Key downside risks include softer-than-expected orders and deliveries, and resurgent supply chain issues. The opposite represents the upside risks. – Nov 11, 2024
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