KUALA LUMPUR, July 5 (Xinhua) -- Analysts have foreseen Malaysia's car demand to stay strong in the second half of 2023, underpinned by strong sales momentum, order backlog and the growth of electric vehicles.

Kenanga Research said in a recent report that it sees Malaysia's automotive sector record in 2022 poised to be repeated in 2023, as it believes a new car is still an affordable luxury for most Malaysian households despite the high inflation and a slowing global economy.

STABLE ECONOMY DRIVES CONSUMPTION

"We maintain our 2023 total industry volume (TIV) projection of 720,000 units that will match the record level achieved in 2022," said Kenanga.

Its optimism is underpinned by strong consumer confidence, the deferment of new excise duty regulations, potentially cheaper hire purchase and attractive new models.

The research house projection is about 11 percent higher than the 650,000 units projected by Malaysian Automotive Association (MAA).

It is noted that the industry's total booking backlogs have held up at a level of 275,000 units compared to 300,000 units three months ago despite heavy deliveries.

From a broader macro standpoint, MIDF Research believes domestic consumption will gain further traction.

"The confluence of sustained GDP growth, improving unemployment and easing inflation suggests potential improvement in consumer spending power, which should eventually trickle down to auto purchases, in our opinion," it said.

It opined that auto purchases are long-term commitments where it believed employment conditions would have a larger bearing on decisions, beyond short-term movements in overnight policy rate.

EV TO BE NEW TREND

Affin Hwang Investment Bank, on the other hand, said in its recent report that the growing popularity of EVs and the introduction of more EV brands and models would be one of the focuses in the second half.

It said the policy formation and favorable incentives for EV adoption have signaled a potential market disruption among existing internal-combustion engine (ICE) players in Malaysia.

"We foresee further entry of global EV players into the local market driven by the provision of franchise approved permits (APs) to pure EV players under Peneraju's Global BEV, which allows new EV franchises to be set up," it said.

According to Affin, this could break up the oligopolistic hold of existing AP holders and disrupt the market as the sales growth of ICE players will likely be capped.

It is noted that this year alone China's carmaker BYD has increased its presence while Tesla has also committed to set up operations in Malaysia.

The extension of EV tax exemptions in Budget 2023 allows EV models to be sold at cheaper prices, thereby intensifying competition within the Malaysian automotive sector, especially with existing players with limited exposure to the EV space, said the research house.

According to Kenanga, battery electric vehicles' new registration has leaped significantly for the past two years (from 274 units in 2021 to 2,631 units in 2022) and is on track to meet the national target for EVs and hybrid vehicles which is 15 percent of TIV by 2030, and 38 percent of TIV by 2040. Enditem

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