The upcoming sales and service tax (SST) expansion, which is scheduled to take effect on July 1, is expected to have a limited impact on the automotive sector directly, according to CIMB Securities. In a research note, it said this was because there would be no changes to the vehicle sales tax, which is presently set at 10%, or to the service tax imposed for maintenance and repair services, currently set at 8% as well as on consumables such as tyres, which is set at 5%,
The firm said that while there could be a slight increase in dealership and showroom rental costs due to the measure, it believed the financial impact would be minimal. Indirectly, however, it said that weaker consumer sentiment could weigh on new vehicle sales in the second half of 2025, as Bernama reports.
While the Malaysian Automotive Association (MAA) has projected a 4.5% year-on-year (y-o-y) decline in total industry volume (TIV) to 780,000 units in 2025, CIMB Securities has forecast a sharper 7.0% drop to 760,000 units, citing potential headwinds from the planned removal of the RON 95 petrol subsidy, which is expected in the second half of the year.
Despite this, the firm said that demand in the sub-RM100,000 segment is expected to remain resilient, supported by national brands and selected entry-level Japanese vehicle models. It projected that national brands would retain a dominant 64.5% market share in 2025.
The company added that a positive point from the removal of fuel subsidies could be an increase in electric vehicle (EV) adoption, aided by the expectation that the full duty exemptions for imported EVs are unlikely to be extended by the government beyond the December 31, 2025 deadline. The firm said it expects a potential spike in EV demand in Q4 as buyers rush to benefit from tax savings.
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