Broker: UOB Kay Hian
Date of Report: 23 July 2025

Malaysia Automotive Sector 1H25: Sales Slide Amid Fierce Competition—Chinese Brands Gain Market Share

Overview: A Challenging First Half for Malaysia’s Auto Market

Malaysia’s automotive sector experienced a notable slowdown in the first half of 2025. The Malaysia Automotive Association (MAA) reported a total industry volume (TIV) of 373,636 units for 1H25, reflecting a 5% year-on-year decline. June 2025 alone saw a sharper drop, with TIV falling 19% month-on-month and 6% year-on-year to 54,832 units. This downturn was attributed to a shorter working month and plant shutdowns during the Hari Raya Aidiladha festive break.
Intense competition—particularly from Chinese carmakers—coupled with muted market sentiment and a high base effect from 2024, has led to limited sector catalysts and capped upside potential in the near term. UOB Kay Hian maintains an UNDERWEIGHT view on the sector, favoring value-driven players with resilient demand.

Key Performance Highlights: National vs. Non-National Brands

• Passenger Vehicles: 1H25 sales fell 3% year-on-year to 347,084 units.
• Commercial Vehicles: 1H25 sales tumbled 21% year-on-year to 26,552 units.
• Total Industry Volume (TIV): Down 5% year-on-year in 1H25.

Performance by Brand: Winners and Losers

National Brands: Perodua and Proton

• Perodua: June sales dropped 29% month-on-month to 22,328 units (down 6% year-on-year). For 1H25, cumulative sales slipped 2% year-on-year to 166,188 units. Perodua maintains its top spot, holding a 44.5% market share.
• Proton: Sales declined 17% month-on-month to 10,638 units (just 1% lower year-on-year). 1H25 cumulative sales fell 4% to 69,352 units, securing an 18.6% market share and second place.
• The declines are attributed to fewer working days and normalization after strong festive promotions in May.

Non-National Brands: Honda, Toyota, Mazda, Nissan, and Rising Chinese Entrants

• Honda: June sales plummeted 27% month-on-month to 4,193 units (down 36% year-on-year). 1H25 sales declined 14% to 33,750 units, ranking third with a 9% share.
• Toyota: Sales dropped 12% month-on-month to 5,324 units (down 5% year-on-year). 1H25 sales slipped 6% year-on-year to 31,226 units, holding an 8.4% share.
• Mazda: Continued its slump with June sales down 12% month-on-month and 53% year-on-year to 526 units. 1H25 sales nosedived 53% to 3,948 units.
• Nissan: June sales fell steeply by 46% month-on-month to 260 units (down 50% year-on-year). 1H25 sales were down 11%.
• Chery: A bright spot—June sales rose 11% month-on-month and soared 85% year-on-year to 882 units. 1H25 sales surged 34% year-on-year to 9,242 units, now fifth in the market share ranking at 2.5%.
• BYD: June sales dipped 7% month-on-month but rose 57% year-on-year. 1H25 sales climbed 39% to 6,069 units.
• Newcomers Jaecoo and Jetour: June sales reached 1,606 and 203 units, respectively, with year-to-date figures at 4,921 units (Jaecoo) and 330 units (Jetour).

Market Share Table: Jan–Jun 2025 vs. Jan–Jun 2024

Chinese Brands Reshape the Competitive Landscape

Chinese automakers continue to gain traction and disrupt established players:

• Chery: 1H25 sales up 34% year-on-year, signaling strong consumer acceptance.
• BYD: 1H25 sales up 39% year-on-year.
• Jaecoo and Jetour: Rapid growth, reflecting a structural shift in consumer preferences towards Chinese alternatives and their expanding market share.

2025 Outlook: Earnings Under Pressure, Cautious Optimism for 2H25

• Sector earnings for 2Q25 are expected to be flattish or show slight growth (ranging from -1.0% to +6.6% quarter-on-quarter), constrained by lower sales volumes and heightened competition.
• Full-year 2025 TIV forecast is maintained at 740,000 units, projecting a 9% year-on-year drop. 1H25 TIV is at roughly 50% of this estimate.
• A stronger second half could materialize, driven by aggressive promotional activities and seasonal year-end demand.

Company Analysis and Outlook

Pecca Group (PECCA MK)

• Recommendation: BUY
• Share Price: MYR 1.49
• Target Price: MYR 1.68
• Market Cap: MYR 1,105.5 million
• 2025F PE: 19.6x
• 2026F PE: 16.0x
• 2025F P/B: 4.7x
• 2026F P/B: 4.6x
• 2025F EV/EBITDA: 4.3x
• 2026F EV/EBITDA: 5.6x
• 2025F ROE: 24.0%
• 2025F Dividend Yield: 4.3%
• Outlook: 4QFY25 results may soften slightly (RM12-13 million, down 9-16%) due to lower Perodua sales, but the company is on track to meet full-year estimates (RM58 million, +5.4% year-on-year). Pecca remains UOB Kay Hian’s top pick for its strong value positioning and resilience in mass-market demand.

Sime Darby (SIME MK)

• Recommendation: HOLD
• Share Price: MYR 1.65
• Target Price: MYR 1.88
• Market Cap: MYR 11,245.7 million
• 2025F PE: 11.2x
• 2026F PE: 10.6x
• 2025F P/B: 0.5x
• 2026F P/B: 0.5x
• 2025F EV/EBITDA: 6.0x
• 2026F EV/EBITDA: 6.0x
• 2025F ROE: 5.3%
• 2025F Dividend Yield: 4.8%
• Outlook: FY25 earnings expected at RM1 billion. 2Q25 results are forecast at RM170-180 million (up 1-7%). Risks include weaker contributions from core business divisions and a broader slowdown in key markets. 3QFY25 saw PBIT decline 31.4% due to Caterpillar price reductions and revenue drops in both the motors and industrial segments.

Bermaz Auto (BAUTO MK)

• Recommendation: SELL
• Share Price: MYR 0.75
• Target Price: MYR 0.64
• Market Cap: MYR 874.9 million
• 2025F PE: 5.0x
• 2026F PE: 8.7x
• 2025F P/B: 1.0x
• 2026F P/B: 0.9x
• 2025F EV/EBITDA: 2.3x
• 2026F EV/EBITDA: 3.9x
• 2025F ROE: 21.1%
• 2025F Dividend Yield: 6.9%
• Outlook: 1QFY26 earnings are expected to be subdued (RM20-25 million, -6% to +18%), reflecting continued weak Mazda sales and stiff competition from Chinese brands. Monthly run rate bookings are low at 700–800 units.

Valuation and Sector Stance

• Automotive sector valuation is currently trading at 11.8x, slightly above -0.5 standard deviation to its five-year historical mean—deemed fair given the muted earnings outlook and limited sector catalysts.
• The sector remains UNDERWEIGHT with strong competition limiting margin recovery and earnings upside.

Sector Outlook: Risks and Opportunities

• Risks: Lack of new national brand launches, intensifying competition from Chinese brands, high 2024 base effect, and cautious market sentiment.
• Opportunities: Potential for stronger 2H25 performance through aggressive promotions and seasonal year-end buying momentum.

Conclusion

Malaysia’s automotive market faces a challenging landscape in 2025, with total industry sales and earnings pressured by shorter working periods, weak demand, and aggressive competition—especially from rapidly advancing Chinese brands. While national champions like Perodua and Proton retain their lead, new entrants are quickly gaining ground, signaling a structural shift in consumer preferences.
Investors should remain cautious, focusing on resilient, value-driven companies like Pecca Group while monitoring the sector for signs of recovery in the second half of the year.