Industry players want an easier and more ‘relaxed’ car financing requirements to boost car sales in the second half of 2026.
Malaysia’s automotive industry is expected to perform better in the second half of 2026, supported by ongoing fuel subsidy measures, electric vehicle (EV) demand, and favourable financing conditions. Yes, there is a move to make car financing easier and this could fuel higher bankruptcies and higher vehicle repossessions in the coming months and years.
A leading market research firm maintained its 2026 total industry volume (TIV) forecast, representing a 5% year-on-year (YoY) decline and remaining slightly below the Malaysian Automotive Association’s (MAA) projection.
The firm said the forecast continues to reflect a challenging macroeconomic environment and inflationary pressures arising from higher energy costs linked to the Middle East conflict. It noted that industry sales during the first five months of 2026 accounted for 40.4% of its full-year forecast.
However, the firm expects a seasonally higher second half, in line with historical trends, with the latter half typically accounting for about 54% of annual TIV over the past decade. The firm also said demand is expected to be supported by the continuation of the Budi95 fuel subsidy programme and the expansion of the Budi diesel subsidy, which has been integrated with the Budi95 quota since July 1st, providing eligible pickup truck and SUV owners with an additional fuel allocation.
Citing the MAA, the firm said the expanded Budi diesel subsidy could support demand in the pickup truck segment after sales declined by 16.7% year-on-year during the first five months of 2026, a steeper fall than that recorded by the broader market.
The firm said Sime Darby may benefit from any recovery in the segment due to its exposure to the Toyota and Ford pickup truck brands. The firm also expects EV sales to remain steady in the second half, supported by promotional campaigns, increased production by national automakers, and a broader pipeline of new models.
It cited Perodua’s recent reduction in the price of its QV-E electric vehicle under its battery-as-a-service (BaaS) model, alongside plans by Proton and Perodua to increase local production following the government’s revised EV policy.
The revised policy raises the minimum cost, insurance and freight (CIF) threshold for imported EVs to MYR200,000 (USD48,895) while lowering the minimum motor output requirement to 180 kilowatts from the previous 200 kilowatts, making locally assembled EVs more competitive. The firm said the policy is unlikely to significantly affect Malaysia’s long-term EV adoption, as consumer demand remains unchanged and the changes could improve the position of national automakers.
However, the firm noted that companies with greater exposure to imported completely built-up (CBU) EV brands could face near-term volume pressure. It cited Sime Darby’s distributorship of BYD but estimated that any earnings impact would be minimal, as the business contributes less than 1% of the group’s net profit.
Meanwhile, the firm expects competition among non-national EV brands such as Zeekr, XPeng and Chery Auto Group to continue, while existing incentives for completely knocked-down (CKD) EVs until the end of 2027 are expected to encourage more manufacturers to establish local assembly operations.
The firm said favourable financing conditions should continue to support vehicle demand, as it does not expect Bank Negara Malaysia to raise interest rates, helping to maintain affordability, particularly in the mass-market segment.
Nevertheless, the firm said automakers’ margins could come under pressure from intensifying competition and unfavourable foreign exchange movements, particularly if the ringgit weakens against the US dollar.
The firm forecasts the sector’s net profit to grow by 6.9% in 2026, primarily reflecting earnings from Sime Darby’s Australian industrial operations and a recovery in its China Motors business.
It also expects Bermaz Auto to record an earnings rebound in 2027 following the launch of the new CX-5 and improvements at its associate companies, while MBM Resources is projected to report weaker earnings this year due to lower Perodua sales amid intensifying competition from Proton.
Overall, the firm maintained its “Neutral” rating on the sector, citing subdued growth prospects despite current valuations. The firm said potential catalysts for the sector include a stronger ringgit against the US dollar and Japanese yen, interest rate cuts, and government measures such as the Hire Purchase (Amendment) Bill 2026. Key downside risks include further depreciation of the ringgit, potential interest rate hikes, tighter access to credit, and margin erosion resulting from intensifying competition.
Source : New Straits Times
