The total industry volume (TIV) of vehicle sales increased 8% month-on-month (MoM) and 3% year-on-year (YoY) in July 2026, supported by continued sales promotions, a longer working month and the introduction of the targeted BUDI Diesel subsidy.
Kenanga Research in its report said the implementation of BUDI Diesel in July, which replaced the previous cash rebate with a direct subsidy at the pump through MyKad verification, helped stimulate commercial vehicle sales.
Commercial vehicle sales rose 21% MoM during the month, with the subsidised diesel price set at RM2.10 per litre.
With July’s performance, Malaysia’s cumulative TIV for the first seven months of 2026 reached approximately 459,000 units, up 3% YoY, which Kenanga said remains broadly in line with its expectations.
The research house expects vehicle sales to remain strong in August, supported by continued promotional activities across the industry. It also expects a specific boost from Perodua, following its immediate price reductions of up to RM4,700 across the second-generation Axia range.
The latest promotions are expected to support demand in the affordable vehicle segment, which continues to underpin Malaysia’s automotive market.
National marques strengthen market position
National carmakers continued to gain ground in July, accounting for an estimated 66% of TIV, up from 63% during the first seven months of 2025.
Perodua remained the largest player, although its estimated market share stood at 41%, compared with 45% in 7MCY25.
Proton, meanwhile, increased its market share to 25% from 18%, supported by sustained demand for affordable vehicles and attractive new model launches.
Kenanga expects national marques to remain the market leader in 2026, with their combined market share estimated at around 67% of full-year TIV.
The research house said the affordable segment remains resilient, while most non-national brands continue to focus on vehicles priced at RM100,000 and above.
Non-national brands
Among non-national marques, Toyota ranked first in July with a 32% market share, ahead of Honda at 25%.
Kenanga attributed Toyota’s performance partly to stronger sales of the Hilux in the commercial vehicle segment following the introduction of BUDI Diesel, while its hybrid models also continued to perform strongly.
BYD ranked third with a 6% share, helped by stock-clearing promotions.
Mazda followed with 5%, with its performance affected by lower completely built-up (CBU) deliveries of the Mazda 3.
Chery also captured around 5% of the non-national market, despite having a range comprising internal combustion engine and hybrid models. Kenanga said new model launches and attractive discounts and rebates across the non-national segment have contributed to market-share dilution.
Discounts remain key competitive strategy
Looking ahead, Kenanga’s 2026 automotive outlook remains centred on several key trends.
The first is continued discounting and rebate campaigns, as automakers seek to gain market share and generate strong initial booking volumes.
However, the research house cautioned that aggressive price competition could come at the expense of margins.
Some automotive players are therefore seeking to diversify into higher-margin businesses.
Kenanga noted that Sime Darby could benefit from its higher-margin industrial division, which has margins of around 7% compared with about 1% for its automotive segment.
Batu Kawan’s automotive operations could benefit from greater focus on the CBU market, which is less affected by the upcoming open market value (OMV) policy, while Hong Leong Industries is increasingly focused on the higher-margin premium motorcycle segment.
OMV policy and Chinese brands reshape industry
Another major development is the new OMV-based excise duty regulation, which is expected to be implemented gradually after being delayed to January 2027 and potentially beyond.
A pre-tax CIF floor price of RM200,000 for imported EVs was implemented in July 2026.
Kenanga said the policy to limit vehicle price increases is still being developed and could be delayed further, potentially beyond the upcoming general election period.
At the same time, Chinese automotive brands are expected to continue increasing their market share through local vehicle production.
This includes brands such as Jaecoo and Chery, which are linked to Chery’s Shah Alam assembly operations; Xpeng, GWM, BAIC and SAIC through EPMB’s Melaka assembly plant; BYD, which could potentially be assembled at Sime Darby’s Inokom Corporation facility in Kulim; and Zeekr through Proton’s Tanjung Malim plant.
Kenanga said the continuation of CKD tax incentives for EVs until 2027, following the end of incentives for CBU models, should support greater localisation of Chinese EV production.
Booking backlog provides earnings visibility
Despite competitive pressures, Kenanga said industry earnings visibility remains positive, supported by a booking backlog of about 170,000 units at end-July 2026.
This is significantly above the average backlog of around 140,000 units in 2025, largely due to strong bookings for the all-new Proton Saga, which has accumulated around 80,000 units in backlog, although production capacity remains a constraint.
More than half of the industry’s backlog comprises new models, suggesting that new product launches continue to attract strong consumer interest.
Kenanga expects the strong order backlog to provide automakers with reasonable earnings visibility in the near term.
EV adoption gaining momentum, but transition remains gradual
Electric vehicle (EV) sales are also continuing to expand rapidly, with Kenanga expecting the segment to remain supported by global automakers clearing existing CBU inventories while transitioning towards localised CKD production.
Proton, which has already begun rolling out its e.MAS 7 and e.MAS 5 EVs from its Tanjung Malim facility, is expected to maintain an EV market share of around 40%-50% of total EV sales.
Nevertheless, Kenanga expects Malaysia’s transition towards battery electric vehicles (BEVs) to remain gradual.
The research house said the current tax exemption for locally assembled CKD EVs until 2027 provides an important near-term incentive, but infrastructure constraints and Malaysia’s subsidised fuel pricing mechanism could slow adoption among middle- and lower-income consumers.
BEV registrations have risen sharply from 270 units in 2021 to 44,813 units in 2025, representing about 5.5% of total industry volume.
For the first six months of 2026, EV sales had already reached 26,192 units, up 106% YoY.
Malaysia aims for EVs to account for 20% of new vehicle sales by 2030, with a longer-term target of 80% by 2050, including hybrids.
The government is also targeting the development of 10,000 public EV charging points, although Kenanga noted that only 5,719 had been built to date, equivalent to around 57% of the target.
Overall, Kenanga expects Malaysia’s automotive market to remain resilient through 2026, supported by strong demand for affordable national models, new product launches, a sizeable booking backlog and rising EV sales, although aggressive discounting, regulatory changes and the gradual shift towards localised EV production will continue to reshape industry dynamics.
