In a press statement today, the research firm explained that this adjustment was made in response to the alleviation of supply chain bottlenecks that had been impacting the country’s automobile industry.
BMI expects this year’s total vehicle sales to rise by 3.8%, as opposed to its previous projection of a 9% decline.
It explained that better-than-expected pent-up demand for vehicle purchases during the sales tax exemption period was a strong factor to the adjusted forecast.
“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,” BMI said.
The sales tax exemption, which expired on June 30, 2022, offered a grace period for exemption extensions until March 31, 2023.
This was applicable specifically for vehicles that were reserved for purchase prior to the conclusion of the sales tax exemption period in June 2022.
The Malaysian Automotive Association reported that vehicle sales rose 12.6% year-on-year (y-o-y) in the seven months of 2023, reaching 429,807 units compared to 381,680 units in the same period last year.
EV outstrips ICE
In today’s statement, BMI projected that electric vehicles (EVs) will outstrip internal combustion engines (ICE) vehicles within their 2023-2032 forecast period.
The research firm projects that total electric vehicle (EV) sales in Malaysia will quadruple in 2023. Presently, the EV penetration rate accounts for 1.8% of the country’s overall vehicle sales.
Several factors are expected to drive the future increase in EV adoption rates.
These include the extension of import duty exemptions for components used in the local assembly of EVs, exemptions from excise duty and sales tax for locally assembled completely knocked-down (CKD) EVs, and exemptions from import and excise duties for imported completely built-up (CBU) units.
Furthermore, BMI’s forecast takes into account the emergence of local EV manufacturing by prominent brands such as Volvo and Mercedes-Benz.
Notably, Mercedes-Benz has announced ambitious plans to electrify 30% of its total vehicle sales in Malaysia by the year 2030.
Chinese EV automaker BYD has also entered the market, offering affordable EV options in the Malaysian market.
Looking ahead, BMI advises caution regarding the potential high-base effects resulting from a robust period of new vehicle demand in 2022-2023, as this may lead to a less favourable sales environment in 2024-2025.
“We have previously expected sales in 2024 and 2025 to rise by 3.3% and 3%, respectively.
“We now expect sales to grow by a modest 1% in 2024, but to contract by 0.5% in 2025 as the local automotive market faces some difficulty and slows down,” said BMI.