OMV Tax Fears Set to Boost Late 2025 Car Sales

Malaysia’s automotive sector is expected to remain stable in 2025, supported by strong demand and favourable income policies, analysts say.

The Malaysian Automotive Association (MAA) has set the official total industry volume (TIV) target for the year at 780,000 units. This is slightly below the record 816,724 units sold in 2024.

BIMB Securities noted that the market could receive a boost in the fourth quarter of 2025, echoing similar views shared by analysts in December 2024 about potential early purchases ahead of the expected introduction of new open market value (OMV) duties in 2026, which may raise vehicle prices.

As of May, the year-to-date TIV stood at 316,737 units. This is 40.6% of the annual target, but 5% lower than the 333,309 units recorded in the same period last year.

Still, sales showed improvement in May. TIV increased by 12.4% to 68,007 units from 60,527 units in April. Passenger vehicle sales rose 12.1% to 55,971 units, while commercial vehicles climbed 15.2% to 5,250 units.

RHB Research is keeping its 2025 TIV forecast at 730,000 units. It expects a surge in electric vehicle (EV) sales this year before the current tax exemptions on completely built-up (CBU) EVs expire after 2025.

However, EVs still only account for around 2% of total vehicle sales in Malaysia. RHB said this is unlikely to significantly impact overall TIV numbers in 2025.

Both RHB and BIMB have highlighted risks to the sector. These include global supply chain issues, weaker consumer sentiment due to higher living costs, and pricing pressure from Chinese automakers amid an ongoing EV price war.

The upcoming OMV duty framework also remains a concern. Although full details are yet to be released, analysts warn it could raise the cost of both imported and CKD cars, especially EVs.

That possibility may encourage buyers to act early, potentially lifting sales in the final quarter of the year.

EV adoption continues to grow, but price remains a key barrier for many consumers. Most Chinese CBU EVs are still priced out of reach for the mass market.

Fuel subsidy reforms may also shift consumer behaviour. RHB said the planned rationalisation of RON95 subsidies could prompt interest in EVs or lead some buyers to switch to more fuel-efficient combustion engine cars.

EV registrations rose 44% in May to 4,152 units, driven by aggressive pricing from Chinese brands across both premium and mid-range segments.

As of March, Malaysia had 4,161 public EV chargers. To meet the government’s target of 10,000 chargers by the end of the year, more than 970 units would need to be installed each month.

However, based on the deployment trend over the past year, it's clear the rollout has slowed considerably, making it unlikely that the year-end target will be met.

What’s also worth noting is that despite setting the target, the government has not made any direct financial investments into these chargers. Instead, the build-up is being pursued under a public-private partnership model, with the private sector leading infrastructure development.

Both BIMB and RHB continue to take a neutral stance on the sector, citing a mix of supporting and limiting factors. Among listed players, RHB maintains a sole "buy" rating on Sime.

Source: The EDGE