MAA forecasts 3.8% drop in 2026 new car sales to 790k due to rising cost of living, weaker purchasing power

So, another record year for new car sales, on the back of three years of consistent increases. With a slew of new brands coming our way and the rallying strength of the ringgit, surely we should brace ourselves for yet another jump in 2026?

Not so fast – in fact, the Malaysian Automotive Association (MAA) is forecasting a 3.8% decline in new car sales this year. The 790,000-unit (730,000 passenger cars, 60,000 commercial vehicles) estimate is a ways off the 820,752 units sold last year and would make 2026 the first time the total industry volume (TIV) dips below the 800,000 unit mark since 2023.

A peek at the data behind the scenes shows that a drop was inevitable. Having shot up from a low of 508,883 units in 2021 to 721,177 units in 2022, new car sales have somewhat plateaued, to the point that 2025’s tally was a scant 0.5% up on the previous year. That’s a difference of almost exactly 4,000 vehicles, which is effectively negligible – and this was despite a record month in December, fuelled by a rush to purchase tax-free EVs before CBU import tax incentives expired on December 31.

The association put this down to several factors, including a rising cost of living that is outpacing the ringgit’s strength, reducing disposable income and leading to weaker purchasing power. According to the ministry of finance, Malaysia’s annual GDP growth is expected to slow to 4.0 to 4.5%, down from 4.9% in 2025.

Broader global economic conditions are also set to be even more challenging this year thanks to US’ “flip-flop” trade policies and the geopolitical uncertainty this creates (president Donakd Trump only recently announced tariffs on eight European countries opposing his desire to take over Greenland). This is expected to weigh down on Malaysia’s trade advantage.

Now let’s look more closely at the automotive industry in particular. With the aforementioned CBU EV tax breaks now gone, prices of fully-imported models are expected to increase, which will likely lead to EV demand – still relatively low anyway due to the nascent state of the market and subsidised Budi95 petrol prices – slowing further.

Thankfully, there’s no risk of wider increases for CKD vehicles as part of open market value (OMV) excise duty revisions, as MAA has just confirmed that this issue has been resolved for good. However, car prices could still end up being higher due to other factors, such as rising manufacturing, component and operation costs squeezing profit margins for carmakers and dealers – impinging on their ability to give discounts.

It’s not all bad news this year, as MAA still expects a relatively strong economy to prop up car sales. Thanks to a stable labour market (the unemployment rate is currently low, at 2.9%), income stability will continue to drive vehicle purchases. In particular, there is strong demand for affordable and fuel-efficient models, especially from national carmakers Proton and Perodua.

These two companies won’t be the only ones to prosper, as the slew of new brands and models slated to be introduced this year – along with continued promos and value-added services – is set to excite the market. The increase in new EV models being assembled locally will also boost EV ecosystem development, and this is expected to lead to more investment, technology transfer and overall growth from foreign makes, although MAA is still sceptical of their willingness to emphasise and develop Malaysia’s EV production capabilities.

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