KUALA LUMPUR: RHB research said the mid-market segment of the automotive market will be the most affected by the planned subsidy rationalisation.
The government is due to announce details of the subsidy rationalisation in the coming weeks.
Most economists expect the gradual float of diesel and RON95 prices.
It expects low-income groups to continue to benefit from subsidies, while high-income individuals will be less impacted.
"We are optimistic about the salary hikes for civil workers, with a more than 13 per cent increase likely encouraging consumer spending on significant purchases."However, we are maintaining our earnings assumptions for now, as overall sentiment in the sector remains cautious due to uncertainty surrounding subsidy rationalisation," it said.
The firm also expects minimal impact from the restructuring of the new Employees Provident Fund (EPF) Akaun Fleksibel, in terms of spurring sales in the automotive sector.
The firm said it is unlikely that withdrawals from this account will lead to substantial spending on big-ticket items, given the modest 2.3 per cent increase in Malaysians' disposable income.
"It is anticipated that only RM4 billion to RM5 billion will enter the economy annually through these withdrawals."It is much less compared to the RM145 billion withdrawn by 8.1 million EPF account holders through previous pandemic-related withdrawal programs."Consequently, the withdrawal per member this time is expected to be lower," the firm said.
RHB research said while the first quarter of 2024 total industry volume (TIV) figure makes up more than 30 per cent of its 2024 TIV assumption of 625k units, the levels are not sustainable given the lack of drivers to boost sales to a new high, after two record-breaking years.
It maintains its TIV forecasts and "Neutral" sector weighting for now.
"Several new electric vehicles (EV) models have entered the Malaysian market since early 2024, including the BYD Seal, Chery Omoda E5, MG4 EV, and GWM Ora 07, priced between RM104,000 to RM200,000 per unit. "As a result, some existing models within the same price range have undergone price reductions ranging from 4 per cent to 19 per cent," it added.
RHB research said that despite EV sales accounting for only 1.3 per cent of total TIV, the introduction of more EV models within the same price range would increase competition.
RHB research prefers automotive names with cheap valuations and strong earnings growth visibility.
Its top pick is Bermaz Auto Bhd.
