Malaysia’s Auto Market Surges: Kenanga IB Raises 2026 Sales Forecast to 800,000 Units Amid Strong Backlog

Kenanga Investment Bank has revised its Total Industry Volume (TIV) forecast for Malaysia’s automotive sector upwards to 800,000 units for 2026, aligning with the latest projection from the Malaysian Automotive Association (MAA). This adjustment reflects a more optimistic outlook for the second half of the year, underpinned by a resilient domestic market, strong demand for affordable vehicles, and a significant backlog of orders that highlights consumer confidence.

A Robust First Half and Rising Electrification
The upward revision follows a solid performance in the first half of 2026. According to MAA data, Malaysia recorded 385,353 new vehicle registrations in the first six months of the year, representing a 3% year-on-year increase. Notably, the shift toward electrified powertrains is accelerating rapidly. Electric vehicle (EV) sales surged by 106% year-on-year to 26,192 units, while hybrid vehicle sales grew by 43% to 25,590 units. With EVs narrowly outselling hybrids in the first half, 2026 may mark a historic milestone as the first year where fully electric vehicles surpass hybrids in annual sales volume in Malaysia.

Kenanga attributes this momentum to several key factors, including aggressive discounting and rebate strategies by manufacturers aiming to capture market share early in the year. Additionally, the gradual implementation of the new Open Market Value (OMV) excise duty regulation—now delayed to January 2027 or potentially beyond—has provided a window of stability for buyers. The introduction of a pre-tax Cost, Insurance, and Freight (CIF) floor price of RM200,000 for imported EVs in July 2026 has also helped level the playing field, encouraging a transition toward locally assembled (CKD) EVs and sustaining demand for hybrids.

The Proton Saga Phenomenon
A major driver of the current optimism is the unprecedented demand for the all-new Proton Saga. As of the end of June 2026, the industry’s total order backlog stood at 152,000 units, significantly higher than the average backlog of 140,000 units seen in 2025. Remarkably, nearly 60% of this backlog approximately 90,000 units is attributed to the new Saga. This surge underscores the enduring appeal of affordable, reliable national cars, even as the market diversifies into newer segments. However, Kenanga notes that this demand is currently constrained by production capacity, suggesting that actual sales figures could be even higher if supply chains were able to keep pace.

Perodua, the other national carmaker, also reports a healthy backlog of around 43,000 units across its model range, indicating that demand remains broad-based and not solely reliant on one brand. More than half of the total industry backlog consists of new models, highlighting that Malaysian car buyers are highly responsive to fresh launches and updated offerings.

Structural Supports and Future Outlook
Looking ahead, Kenanga identifies several structural supports that should sustain the 800,000-unit TIV target. These include the increasing localization of Chinese carmakers, which is expanding choice and competition in the affordable segment; sustained demand for value-for-money vehicles; and new hire-purchase loan policies that have improved accessibility for younger buyers. A stable labor market and continuous introduction of new models further bolster the industry’s earnings visibility.

While the commercial vehicle segment has contracted by 11% due to economic adjustments, the passenger vehicle market’s strength has more than compensated for this decline. EV makers are currently focused on clearing their fully imported (CBU) stock while transitioning to CKD operations, a move that is expected to lower prices and boost volumes in the long term.

For a nation often described as "car-crazy," the automotive sector remains a vital barometer of economic health. With a backlog of 152,000 units and a forecast of 800,000 sales for the year, Malaysia’s auto industry is demonstrating remarkable resilience, proving that the love affair between Malaysians and their cars is far from over.