RHB Research Predicts Fuel Subsidy Impact And Charged EV Competition

According to RHB Research, the planned subsidy rationalisation plan will most likely have the greatest impact on the car industry's mid-market segment. Expectations for progressive price liberalisation of diesel and RON95 fuel are building as the administration prepares to publish details.

Although the firm believes that low-income groups would continue to receive subsidies, the impact on high-income persons is projected to be minor. RHB Research is hopeful about higher consumer spending as a result of anticipated civil worker compensation increases, which are expected to exceed 13%.

However, it maintains its earnings forecasts for the industry, citing the present cautious mindset due to uncertainties over the upcoming subsidy rationalisation.

RHB Research also highlighted the potential impact of the recently revised Employees Provident Fund (EPF) “Akaun Fleksibel”, claiming that it would not significantly increase vehicle sales. This is due in part to a slight 2.3% increase in Malaysians' disposable income and a smaller rate of withdrawal (RM4 billion to RM5 billion) as compared to the previous pandemic-related programs.

Furthermore, despite an automotive sector experiencing a good start in 2024, where the Q1 Total Industry Volume (TIV) accounting for more than 30% of the year's anticipated TIV of 625,000 units, RHB Research believes this momentum is not sustainable.

It cites a lack of new sales drivers following two consecutive record-breaking years, thus it keeps the sector at "Neutral" rating.

Moreover, in this short five month span, numerous new electric vehicle (EV) models have been introduced in Malaysia, which includes the BYD Seal, Chery Omoda E5, MG4 EV, and GWM Ora 07, with prices ranging from RM104,000 to RM200,000.

These low priced EV offerings had in turn resulted in price reductions of 4% to 19% in some existing models in the same market segment to remain competitive. Although EVs presently account for only 1.3% of total TIV, the introduction of more new models in the upcoming months at affordable pricing is projected to increase market rivalry.