Policy Clarity Drives Optimism: MAA Raises 2026 Vehicle Sales Forecast to 800,000 Units

The Malaysian Automotive Association (MAA) has raised its 2026 total industry volume (TIV) forecast to 800,000 units, up from an earlier projection of 790,000 units, following stronger-than-expected vehicle sales in the first half of the year and improved visibility on future policy changes.

The upward revision reflects a more confident outlook for Malaysia's automotive sector, buoyed by robust demand for sport utility vehicles (SUVs), accelerating adoption of electrified vehicles, and greater policy certainty following the government's decision to extend the timeline for the New Customised Incentive Mechanism (NCIM) and P.U.(A) 402 until 31 December 2026.

MAA's revised forecast comprises 744,000 passenger vehicles and 56,000 commercial vehicles, compared with its earlier projections of 730,000 and 60,000 units respectively. The association has also raised its forecast for electric vehicle (EV) sales to 120,000 units, representing 15 per cent of the revised TIV, from an earlier estimate of 100,000 units. Battery electric vehicles (BEVs) and hybrid vehicles are each expected to contribute 60,000 units.

First-Half Performance Exceeds Expectations

The industry recorded a TIV of 385,353 units in the first six months of 2026, up three per cent from 373,636 units in the same period last year. This represented an increase of 11,717 units, reflecting the resilience of the domestic automotive market amid a stable economic environment and continued consumer demand.

Total industry production (TIP) rose 1.2 per cent to 356,946 units in the first half, up from 352,626 units in the corresponding period last year.

MAA president Mohd Shamsor Mohd Zain attributed the stronger first-half performance to a 19 per cent increase in SUV sales, particularly driven by Proton's EV offerings and new model introductions, as well as a 69 per cent jump in all types of electrified vehicle (xEV) sales.

National carmakers continue to dominate the market, with the combined market share of Proton Bhd and Perusahaan Otomobil Kedua Sdn Bhd (Perodua) rising to 67 per cent, equivalent to 256,304 units, compared with 63 per cent a year earlier. Perodua accounted for 41 per cent of the total market, while Proton contributed 25 per cent. Non-national brands accounted for the remaining 33 per cent, or 129,049 units.

Policy Clarity: The Catalyst for Confidence

Greater policy clarity from the extended timeline for the NCIM has given Malaysia's automotive industry more confidence to plan production, investments and sales strategies, supporting a more positive outlook for 2026.

MAA said the government's decision to further defer the implementation of the NCIM and P.U.(A) 402 until 31 December this year provides manufacturers and distributors with more time to prepare their operational plans, investment commitments and market strategies.

P.U.(A) 402 refers to the Excise Regulations (Determination of the Value of Locally Manufactured Goods for the Purpose of Imposing Excise Duty). In simple terms, it is a regulation that determines how the value of locally assembled or manufactured vehicles is calculated for excise duty purposes, which in turn can influence vehicle pricing.

The NCIM, currently being refined by the Investment, Trade and Industry Ministry, is expected to introduce a more targeted incentive framework focused on strengthening localisation, technology transfer and higher-value automotive activities, including automotive electronics, software development, battery technologies and advanced driver assistance systems.

Constructive Engagement with Industry

MAA president Mohd Shamsor Mohd Zain said discussions with the ministry on the NCIM have been constructive, with continued engagement between industry players and the government. He noted that the additional six-month extension would allow more consultation to ensure the new mechanism balances localisation goals, domestic ecosystem development and industry competitiveness.

MAA vice president Alagasan Gadigaselam said the industry supports efforts to increase local content, strengthen vendor development and encourage technology transfer.

"Many locally manufactured components incorporated imported raw materials or materials specified by global original equipment manufacturers, but they still generate significant Malaysian value through engineering, manufacturing, processing, tooling, et cetera. Our objective is to work with the government to ensure the implementation framework is practical, commercially viable, and supports continued investment and long-term industry competitiveness," he said.

Commercial Vehicle Segment Faces Headwinds

While passenger vehicle demand remained resilient, MAA noted that the commercial vehicle segment continued to face pressure. Sales in the segment declined 11 per cent, largely due to the withdrawal of the diesel subsidy for private registrations, which weighed on demand and contributed to lower production levels in certain vehicle categories.

MAA expects the contribution from the commercial vehicle segment to total TIV this year to decline to seven per cent from eight per cent previously. However, the association expects to see some improvements following the introduction of the BUDI diesel subsidy.

Outlook: Cautious Optimism for Second Half

MAA expects consumer confidence, stable financing conditions, new model launches, year-end promotional campaigns and the extension of the NCIM postponement until 31 December 2026 to support vehicle sales in the second half of the year.

MAA has also received assurance from the government that any eventual changes arising from the review of existing automotive incentive arrangements, including P.U.(A) 402, are expected to have little or no impact on vehicle prices. Authorities are still refining the calculation methodology to account for different business models across the industry and have committed to providing sufficient lead time before any changes take effect.

Despite the upward revision, the forecast remains below the industry's record 2025 sales volume of 820,752 units. MAA cautioned that geopolitical developments, exchange rate volatility and global trade uncertainties remain key risks to the outlook.

The policy clarity provided by the extended NCIM timeline has given Malaysia's automotive industry the confidence to plan for the future. With strong first-half performance, sustained consumer demand, and a clear policy direction, the sector is well-positioned to navigate the challenges ahead even as it falls short of the record highs of 2025.