KUALA LUMPUR: BMI, a Fitch Solutions company, has maintained its cautious stance on Malaysia's vehicle market in 2024 and 2025 due to high base effects which could disrupt the record sales expected this year.
The company said this could translate into a weaker sales environment in the beginning of 2024.
With that, BMI has revised its forecast for 2024 and 2025 lower, ahead of the upward revision in 2023 vehicle sales.
"We have previously expected sales in 2024 and 2025 to rise by 3.3 per cent and 3.0 per cent respectively, and now expect sales to grow by a modest 1.0 per cent in 2024, but to contract by 0.5 per cent in 2025 as the local auto market faces some difficulty and somewhat slows down," it said.
Nonetheless, BMI believed that high economic growth levels, dynamic economy and high income levels is becoming the magnate for investments for high-tech sectors such as semiconductor manufacturing space.
This, the company said, will ensure the vehicle demand remains at elevated levels.
BMI said the upward revision is also due to the much better than expected pent-up demand for vehicles purchased during the sales tax exemption period.
The company expects sales to rise by 3.8 per cent which is in contrast to its previous forecast of a 9.0 per cent decline.
"The sales tax exemption lapsed on June 30 2022 and there was a grace exemption period that lasted up to March 31 2023 for those cars which have been booked for purchase before the end of the sales tax exemption period (June 2022)," it said.
BMI noted that Malaysian Automotive Association (MAA) shows that demand remained elevated all throughout the first half of 2023 (H123).
"Easing supply chain constraints have given a boost to Malaysia's total vehicle sales as fulfilled bookings reveal the true extent of pent-up demand," it said.
On electric vehicles (EV), the company emphasised that the demand for EVs will outpace internal combustion engine (ICE) cars within its 2023 to 2032 forecast period.
"We currently forecast total EV sales to quadruple in 2023, although the country's EV penetration rate (EV sales as percentage of total vehicle sales) will sit at just 1.8 per cent," it said.
In terms of EV adoption rates in the country, BMI cited extension of import duty exemptions for components for local assembly, excise duty and sales tax exemptions for locally assembled completely knocked down EVs are the key drives for Malaysia prospective growth.
This also includes the import and excise duty exemptions on imported completely built-up units.
