RHB: EVs Hold Promise, But Policy Clarity Is Still Lacking

RHB Investment Bank Bhd (RHB) is sticking with a 'neutral' call on the automotive and auto components sector. The firm reckons performance is likely to remain sluggish, weighed down by the current economic cycle and a lack of strong catalysts to push sales or revenue higher.

RHB said it’s taking a careful stock-picking approach and highlighted Sime Darby as its top pick. The group’s wide range of EVs makes it better positioned to handle the eventual rationalisation of RON95 fuel subsidies.

Perodua was also mentioned as a brand that could help offset pressure from rising competition among non-national carmakers.

On the subsidies front, RHB believes RON95 subsidies will still be rolled out, but probably not anytime soon. The criteria, which were supposed to be announced in Q1 2025, haven’t been revealed.

The bank said the plan is to use MyKad with a two-tier pricing system, although there are concerns about potential misuse. The classification for the top 15% income group, which wouldn’t qualify for subsidies, is also still under review. This could push the launch beyond mid-2025.

While policy clarity is lacking, the shift is expected to raise car ownership costs, push more buyers toward cheaper brands, and potentially accelerate EV adoption - though the limited range of affordable EVs remains a challenge.

EV policy direction in Malaysia is still in flux. Tax exemptions for CBU EVs will end by late 2025. This move is meant to encourage OEMs to set up local assembly, especially since CKD EVs will enjoy tax breaks until end-2027.

But because most EVs in Malaysia are imported, ending CBU exemptions could slow adoption. OEMs also remain hesitant to invest in local manufacturing without a clear long-term policy roadmap.

On top of that, RHB flagged the ongoing uncertainty around the OMV policy review. The new formula for calculating excise duties on CKD vehicles might include sales-related costs, not just manufacturing costs.

If enforced in January 2026, it could push car prices up by 10–30%. This might lead to a short-term buying rush before the new duties kick in, but resistance from local carmakers could still influence the final outcome.

RHB forecasts TIV for 2025 at 730,000 units, down 11% y-o-y, mainly due to the high base from last year.

Source:  BERNAMA