KUALA LUMPUR: Chinese automakers and parts suppliers are expected to divert their focus toward tariff-friendly regions such as Southeast Asia, with Malaysia likely to emerge as a key target, as they face high tariffs in the US and Europe.
CIMB Securities Sdn Bhd said this potential shift could lead to a surge in Chinese vehicle and components imports, offered at highly competitive prices to offload excess capacity.
"While this influx may benefit consumers in the short term by providing greater variety, access to advanced electric vehicle (EV) technologies, and more affordable options, it would also intensify competitive pressure on domestic players.
"Japanese, South Korean and European marques operating in Malaysia are already feeling the heat, as Chinese brands like BYD and Chery enter the market with advanced features, scale-driven cost advantages, and aggressive pricing strategies," it said in a note today.
Amid this upheaval, the firm believes that national brands like Perodua are well-positioned to defend and potentially expand their market share.
It added that Perodua's competitive advantage stems from its affordable pricing and high local content, which help cushion the brand from fluctuations in import costs and currency movements.
"Its ability to maintain stable pricing is a major advantage as Malaysian consumers become more cost-conscious.
"Already dominant in the mass-market segment, Perodua stands to gain further if buyers who might have considered foreign brands opt for economical and locally produced alternatives," it noted.
Meanwhile, CIMB Securities also foresees minimal direct impact from the Trump administration's reciprocal tariff policy, given Malaysia's limited export volume of fully assembled vehicles and auto parts.
However, it anticipates indirect impacts stemming from imported inflation, operational cost pressures and potential slowdown in consumer demand.
"A prolonged tariff conflict and any resultant weakening of the ringgit would raise the price of imported completely knocked down (CKD) kits, components, and fully assembled vehicles.
"Currency volatility could squeeze margins and lead to higher input costs, putting pressure on automakers to either absorb the hit or pass it on to consumers," it said.
The firm also noted that a prolonged trade conflict could also dampen consumer sentiment, indirectly affecting big-ticket spending such as car purchases.
"In Malaysia, where motor vehicle purchases are often tied to consumer financing, any deterioration in sentiment could reduce new vehicle bookings.
"We believe the extent of the impact will depend on the duration and severity of the US-China trade conflict and ringgit volatility," it added.
Overall, CIMB Securities has maintained a 'Neutral' rating on the auto sector owing to a subdued growth outlook amid intensifying market competition.
Sime Darby Bhd remains its top sector pick, owing to its earnings-accretive acquisition of UMW Holdings Bhd, growing exposure to Australia's mining sector, and potential monetisation of non-core and land bank assets.
