Malaysia’s automotive sector on the rebound, credit outlook remains stable

Published on 29 Oct 2021.

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Protracted lockdowns saw contractions for automotive sales in the last 18 months. But sales tax exemption since June 2020 under the government stimulus measures provided respite. Total industry volume (TIV) in 2020 reached 529,434 units, higher than expected thanks to the vehicle sales tax exemption. For 9M 2021, TIV fell 7% y-o-y to 318,874 units as lockdown extensions in 3Q 2021 took its toll. Now that these restrictions have been lifted, pent-up demand will lift the TIV in the last quarter of this year as buyers rush to complete purchases before the tax exemption ends. 

RAM maintains a stable outlook on the local automotive sector in 2022, driven by an expected improvement in the TIV in the next two years. TIV will get a further boost, should the government decide to extend the tax exemption beyond December. Nevertheless, a return to pre-pandemic TIV (circa 600,000 units) is not expected until 2023, due to near-term economic challenges and the shortage of key parts. As a result, RAM expects the 2021 TIV to fall to 500,000 units before rebounding to around 550,000 units in 2022. 

Note: Debt coverages for APM Automotive Holdings Berhad and Tan Chong Motor Holdings Berhad are based on funds from operations debt coverage, while those for Bermaz Auto Berhad are based on operating profit before depreciation, interest and tax debt coverage.


Given that the local automotive market is near saturation, the industry requires a new catalyst to further boost TIV beyond just organic growth. The increase in adoption of green and clean cars could be the “game-changer” for the Malaysian automotive sector in the future. Supportive government policies will no doubt help drive adoption and hasten development of a robust domestic supply ecosystem for new technology.

The global adoption of electric vehicles (EV) is expected to accelerate in the coming years. However, among developing countries, the adoption is nascent at best. Thailand and Indonesia have set effective policies that have attracted manufacturers of EVs and their related components. Malaysia in comparison, has lagged behind, notwithstanding its relatively well-developed infrastructure and strong consumer preference for contemporary products and new technology.

“Malaysia’s auto sector is at risk of being left behind if it remains where it is today. This is because EVs require very different supply and service ecosystem,” said Ben Inn, RAM’s rating specialist with corporate ratings at the RAM Credit Summit 2021 held last week. 

“While Malaysian consumers may be ready to embrace EVs, their pricing remains a pain point. EVs tend to be more expensive as their batteries are still costly,” he added. Hybrids, with smaller batteries and more accessible pricing, have been more readily available. Even then, these only attract a niche following in the local market. 

During the Summit’s panel session “Corporates: A Reset for Business Sustainability”, panellists agreed that the EV space is the way forward for the industry, although affordability remains a key hurdle. In addition, the ecosystem required to support EVs, such as sufficient sources of renewable energy and charging stations, is still not in place. 

To facilitate the growth of EVs in Malaysia, RAM remains optimistic that the government will introduce supportive policies in the upcoming Budget 2022. The National Energy Policy, which is expected to be introduced next year, is also envisaged to detail a more comprehensive roadmap for Malaysia’s ambitions to reach carbon-neutrality by 2050, at the earliest.

The RAM Credit Summit is an annual flagship event for investors, clients and associates of RAM. This year’s Summit, themed “Looking into 2022 and Beyond” saw a total of 17 presenters and panellists from various industries discuss pertinent issues and their outlook during the event held from October 20 to 22. 

To access recordings and exclusive soundbites of the Summit, visit https://www.ram.com.my/news-events/


Analytical contact
Ben Inn
(603) 3385 2510

Thong Mun Wai
(603) 3385 2522

Media contact
Sakinah Arifin
(603) 3385 2505

About RAM Rating Services Berhad (RAM Ratings)

Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Registration of Credit Rating Agencies, 2011. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 


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