PETALING JAYA: A sharp decline in auto sales has intensified price competition, with companies prioritising market share over margins that could potentially result in stronger total industry volume (TIV) in the fourth quarter.
October TIV is expected to be supported by year-end promotions and a potential demand rush for electric vehicles (EV) ahead of the expiry of completely built up (CBU) EV tax exemptions, said TA Research.
September TIV 2025 declined 21.5% month-on-month to 58,490 units.
Intense price competition will pressure margins and any market share gains are likely to come at the expense of profitability, TA Research added.
The research house has retained its TIV forecast at 750,000 units, representing an 8.2% year-on-year (y-o-y) decline, underscoring a cautious outlook for the automotive sector.
RHB Research lifted its 2025 TIV assumption to 795,000, implying a 3% y-o-y decrease from 2024, while CIMB Research lifted its forecast by 30,000 units to 790,000 units from 760,000.
RHB Research also believes the focus ahead is on assembling EVs locally and anticipates a pick-up in EV sales towards year-end, ahead of the expiry of tax holidays for CBU EVs at end-January 2026.
The key concern is potential price increases, with industry players anticipating hikes of 15% to 30%.
It is also cautious on the intensifying competition within the non-national car segment, no thanks to the influx of Chinese marques. It also does not anticipate any near-term re-rating catalysts for the sector.
TA Research, meanwhile, has kept its “underweight” stance on the sector, while both CIMB Research and RHB Research have retained their “neutral” call.
TA Research also maintained its “sell” call on Bermaz Auto Bhd with a target price (TP) of 51 sen a share, MBM Resources Bhd (TP: RM4.31 a share) and Sime Darby Bhd (TP: RM1.97 a share).
Furthermore, CIMB Research noted the sector is currently trading at a 10.3 times weighted-average 2026 price-to-earnings ratio.
While this valuation discount reflects muted earnings growth prospects in a highly competitive environment, the sector continues to offer attractive dividend yields of 5.3% to 5.7% for 2025 to 2026.
Sime Darby has remained the research house’s top pick, underpinned by earnings recovery in its Australian mining operations, its broad EV portfolio, its strategic stake in Perodua, and potential value unlocking from non-core and land bank assets.
The key catalysts for the sector include the strengthening of the Malaysian ringgit against the US dollar and Japanese yen, interest rate cuts, and supportive government policies that stimulate domestic demand.
