PETALING JAYA: After a record-breaking year, analysts expect the automotive sector momentum to cool as cost pressures, regulatory changes and intensifying competition reshape the landscape.
Hong Leong Investment Bank (HLIB) Research and Kenanga Research maintained a “neutral” stance on the sector, projecting a moderation in total industry volume (TIV) after 2025 closed at a record high of 820,752 units.
HLIB Reserach forecast TIV to ease 5% to 780,000 units, while Kenanga Reserach is cautious, expecting volume to dip 12% to 725,000 units, citing weaker purchasing power and post-boom normalisation.
Despite softer volumes, analysts saw clear winners.
HLIB Research’s top picks are MBM Resources Bhd and Sime Darby Bhd, leveraged on Perodua’s resilient mass-market dominance and, in Sime’s case, a strong industrial division.
Meanwhile, an industry player said 2026 is shaping up as a year of consolidation rather than growth.
“Volume may dip, margins will be pressured by promotions and competition, but well-positioned players with scale, localisation and exposure to affordable segments, notably Perodua-linked distributors, selected importers and two-wheeler manufacturers, are still poised to outperform within a cooling but structurally evolving auto market,” he told Starbiz.
HLIB Research noted that MBM Resources would benefit from its strong exposure to Perodua while Sime is supported by sustained strength in its industrial segment and stronger contribution from UMW Holdings Bhd across all sub-segments.
Both offer dividend yields of 5% to 7%, cushioning earnings volatility.
Kenanga Research, meanwhile, prefers Bermaz Auto Bhd and Hong Leong Industries Bhd.
According to the research house, Bermaz is insulated from impending excise-duty changes as a completely built-up-focused player, while Hong Leong Industries benefits from high localisation and exposure to the booming motorcycle segment, where demand hit about 700,000 units in 2025 with Yamaha holding over half the market.
Structurally, the sector is being reshaped by three forces: regulatory change, Chinese competition and electrification.
From July 2026, Malaysia will gradually implement a new open-market-value excise duty framework, with analysts expecting modest price increases.
At the same time, Chinese brands are accelerating localisation, using completely knocked-down incentives that run until 2027, eroding the position of traditional non-national marques.
Mazda, for instance, saw its market share fall to about 1% in 2025 amid intense competition from Chinese marques, according to Kenanga Research.
Meanwhile, analysts said electric vehicle (EV) adoption remains rapid but uneven.
Proton Holdings Bhd’s e.MAS 7 led the segment, while BYD climbed to a 1.8% overall market share and is planning local production in Tanjung Malim from the second half of 2026.
However, Kenanga Research expected a gradual transition, warning that infrastructure gaps and targeted petrol subsidies could slow mass adoption, even as Malaysia targets EVs to form 20% of new sales by 2030.