Auto sector to have minimum impact from SST expansion
KUALA LUMPUR: CIMB Securities Sdn Bhd has projected the upcoming Sales and Service Tax (SST) expansion in July 2025 to have a limited direct impact on the automotive sector.
In a research note, it said vehicle sales are already subject to a 10 per cent sales tax, while maintenance and repair services incur an 8.0 per cent service tax.
'That said, there may be a slight increase in dealership and showroom rental costs due to the measure, although we believe the impact will be minimal.
'Indirectly, however, weaker consumer sentiment could weigh on new vehicle sales in the second half of 2025 (2H 2025),' it said.
The Malaysian Automotive Association (MAA) has reportedly projected a 4.5 per cent year-on-year (y-o-y) decline in total industry volume (TIV) to 780,000 units in 2025, attributing this to demand normalisation and a reduced industry order backlog.
CIMB Securities has, however, forecasted a sharper 7.0 per cent y-o-y decline in TIV to 760,000 units, due to potential headwinds from the planned removal of the RON95 petrol subsidy in 2H 2025, which Prime Minister Datuk Seri Anwar Ibrahim has affirmed will proceed as part of the government's subsidy rationalisation.
'Despite this, we expect demand in the sub-RM100,000 segment to remain resilient, supported by national brands and selective entry-level Japanese models.
'We project national brands to retain a dominant 64.5 per cent market share in 2025, with non-national marques accounting for the remaining 35.5 per cent,' it said.
CIMB Securities also believed the removal of fuel subsidies could accelerate battery electric vehicle (BEV) adoption. BEV sales nearly doubled y-o-y in 1Q 2025 to 5,394 units from 2,703 units a year ago, with combined BEV and hybrid penetration rising 1.9 percentage points y-o-y to 7.3 per cent.
'With full duty exemptions for imported electric vehicles (EVs) set to expire by end-2025, and the government unlikely to extend it beyond the Dec 31, 2025 deadline, we expect a potential spike in EV demand in 4Q 2025 as buyers rush to benefit from tax savings,' it said.
CIMB Securities has maintained its 'Neutral' rating on the sector due to a subdued growth outlook amid intensifying market competition.
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