The Malaysian automotive industry is the third largest in Southeast Asia, and the 23rd largest in the world, with an annual production output of over 500,000 vehicles. The automotive industry contributes 4% to Malaysia’s GDP.
Story outline
- Increasing middle-class population with higher disposable income drives automotive finance industry
- Malaysia’s number of vehicle finance population reached~ 33.3 million, emphasizing the importance of personal transportation.
- Affordable car ownership facilitated by low interest rates stimulates market demand in Malaysia.
1.Rising population of middle class in Malaysia
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Malaysia having the total no. of population is around~ 32.2 million in year 2022 , with the growth rate of 1.09% rising population every year.
The group of people belongs to Middle class is about 40% in malaysia , earning the average salary of about between RM 4,851 to RM 10,970 ( 1,485 dollars ) per month.
As per the expansion of the population in the country , the need for transportation has resulted in high demand for vehicles. And Malaysians’ rising income levels have improved their spending power, driving up demand for cars. As a result, people seek financial aid to buy automobiles and realize their dream of owning a car, which in turn increases demand for automotive loans.
2.Growing no. of vehicles in Malaysia automotive industry
There are now more vehicles on the road than humans in Malaysia, with the growth rate of outpacing human population for the first time.
In Malaysia, the number of vehicles on roads grow from 15.2 million in 2019 to 17.3 million in 2021. With having the current population of 32.2mn, in Malaysia the number of the vehicle on roads grows up to by one million every year.
The automotive sales market in Malaysia, with its approximately 33 million inhabitants. Surprisingly, the Malaysian automotive market grew by more than 40 percent this year after it had declined for two years in a row due to the COVID-19 pandemic. However, it is unlikely that Malaysia would take over the other two ASEAN countries with much larger automotive markets.
With the growing demand for car, the auto finance market is expected to grow in the future.
3.Low interest rate on purchasing car in Malaysia
As Malaysia witness the rapid growth in the rise of middle class population in the country and increasing no. of vehicle in the country leads to the low interest rate for purchasing the car in the country.
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According to KEN RESEARCH , Malaysia Auto-finance Market is estimated to grow at a positive CAGR of ~3% in next 5 year, due to increasing demand for car and rising middle class population.
4.Government Support and Initiatives in automotive industry
The automotive industry contributes just 4% to the country’s gross domestic product (GDP) currently. The government of Malaysia has launched The National automotive policy(‘NAP2020’). Under the NAP 2020, the government is targeting to grow that to 10% of GDP by 2030.
Malaysia Introduces Enhanced Auto Industry Incentives to Encourage Expansion among Local Firms, the government, through the Malaysian Investment Development Authority (MIDA), has evaluated and approved tax incentives valued at MYR 4.6 billion (USD 1.12 billion) involving 13 automotive projects since 2014. The extended and enhanced incentive is currently opened for application until 1 December 2025.
Thus, these government policies are helping the automotive industry in Malaysia.
conclusion
The rise of the middle class, an increase in the number of automotive finances, and government providing all contribution to the expansion of the automotive financing sector in Malaysia in recent years. Demand has been spurred by rising disposable income and middle-class desires to buy cars, while low interest rates have reduced the cost of auto ownership. The government’s actions and policies will allow the automotive sector to flourish even more, which will help Malaysia’s economy succeed.
