The automotive sector is poised for a stronger second half of 2026, supported by expanded fuel subsidy programmes, resilient electric vehicle (EV) demand and stable financing conditions, although intense competition and currency pressures are expected to continue weighing on earnings, according to CIMB Securities.
For the first six months a total of 385k vehicles were sold of which national cars were 256k up 8% from 2025. The research house has maintained its Neutral rating on the sector, while naming Bermaz Auto Bhd and HI Mobility Bhd as its preferred stocks.
CIMB has revised its full-year total industry volume (TIV) forecast to 800,000 units, with first-half vehicle sales accounting for 48% of the projection. It expects the remaining 52% to be delivered in the second half, in line with historical trends where the latter half of the year typically contributes about 54% of annual sales.
The stronger outlook is expected to be supported by the continuation of the government’s Budi95 fuel subsidy programme and the expansion of the Budi Diesel subsidy scheme.
Effective July 1, eligible pickup truck and diesel-powered SUV owners can receive an additional fuel allocation of up to 100 litres monthly under the expanded programme.
According to the Malaysian Automotive Association (MAA), the enhanced diesel subsidy could revive demand for pickup trucks, a segment that recorded a steeper 19.3% year-on-year decline in sales during the first half compared with the broader automotive market.
CIMB said Sime Darby Bhd is well positioned to benefit from any recovery in the pickup truck segment due to its distribution exposure to Toyota and Ford, two of Malaysia’s leading pickup brands.
The brokerage also expects EV sales momentum to remain robust through aggressive promotional campaigns and increased production by national carmakers Proton and Perodua.
A wider range of locally produced EV models is expected following the government’s revision of EV import policies, which increased the minimum cost, insurance and freight (CIF) value for imported EVs to RM200,000 while lowering the minimum motor output requirement to 180 kilowatts from 200 kilowatts previously.
CIMB believes the policy will not materially slow Malaysia’s long-term EV adoption, arguing that underlying consumer demand remains intact while strengthening the competitive position of local manufacturers.
However, distributors with greater exposure to imported completely built-up (CBU) EV brands may face short-term sales pressure.
Sime Darby, for example, could see slower sales growth from its BYD distributorship if affected models become less competitive under the revised policy, although CIMB estimates the earnings impact would be minimal as BYD contributes less than 1% of the group’s net profit.
Competition in the EV market is also expected to intensify with new model launches from brands including Zeekr, XPeng and Chery.
The research house expects most EV manufacturers to increasingly localise production through completely knocked-down (CKD) assembly to remain competitive while tax incentives remain available until the end of 2027.
Meanwhile, stable interest rates are expected to support vehicle affordability, particularly in the mass-market segment.
Despite the improving sales outlook, CIMB warned that earnings could come under pressure from aggressive pricing competition and the weaker ringgit against the US dollar, which may raise costs for imported components and vehicles.
For 2026, the research house projects the automotive sector’s net profit to grow 6.9% year-on-year, driven mainly by stronger earnings from Sime Darby, supported by resilient performance from its Australian industrial operations and a recovery in its China Motors business.
Bermaz is expected to post a strong earnings rebound in the financial year ending April 2027, supported by the launch of the new Mazda CX-5 and improved performance from its associate companies.
In contrast, MBM Resources Bhd is forecast to record weaker earnings due to softer Perodua sales amid intensifying competition from Proton.
Although the sector continues to offer attractive dividend yields of between 6.8% and 7.2% for 2026 and 2027, CIMB believes earnings growth will remain modest given heightened market competition.
The brokerage said potential catalysts include a stronger ringgit, interest rate cuts and supportive policies such as the proposed Hire Purchase (Amendment) Bill 2026, while downside risks include further currency weakness, tighter credit conditions and continued margin compression.
