PETALING JAYA: Malaysia needs to find ways to absorb an oversupply of vehicles as falling resale values and cheaper new cars weigh on the used car market, according to industry observers.
Automotive industry analyst Hezeri Samsuri said the country must find an exit for the growing number of vehicles in the market.
“Perodua is paving the way for export used Peroduas to developing nations such as Sri Lanka and Bangladesh, and to Africa, among others. This is a good move and we hope it will spur a new and strong industry,” he told SunBiz.
He said used car prices are likely to continue declining unless measures are introduced to address the growing oversupply of vehicles in the market.
“If the government realises that the gap between low used car prices and new car prices is getting bigger and bigger, they either have to speed up what Perodua is doing or cut the loans down to seven years or introduce a cash for clunker programme with a bigger carrot to dangle and is opened to all brands, unlike the RM4,000 matching grant programme they just introduced to national brands only,” he said.
Hezeri said Malaysia’s used car market functions similarly to those in other countries, where demand largely determines market conditions.
However, he noted that demand is currently slowing as more consumers opt to buy new vehicles.
Hezeri said, “The biggest difference between Malaysia and other countries is that we have a very high motorisation rate, and car loans can stretch up to nine years. This means Malaysians have too many cars per household and our long loan tenure helps lower our monthly instalment which allows car companies to put higher prices as consumers can still afford them.”
This situation, he added, has been going on for a long time and it is okay as long as the motorisation rate is lower and there is no market disruptions such as newer brands with lower price tags.
“Malaysians will have to dispose of their current cars or they will just keep their old cars if they want to buy new vehicles. If they can’t do both, sales of new vehicles will be negatively affected,” Hezeri said.
Meanwhile, Jetour Auto Malaysia market research and product marketing executive Shahrul Farhan Abdul Wahab said the entry of Chinese automakers in recent years has reshaped the automotive landscape.
“As many Chinese players entered the market in the last couple of years, bringing more affordable EVs and competitive ICE vehicles with more attractive product packaging, the overall market landscape has changed.”
He said the new entrants have introduced highly competitive pricing, forcing traditional market leaders such as Japanese brands and other automakers to slash prices to levels that would have been unthinkable five or six years ago.
Newcomers have kept the market exciting for buyers with limited upgrading to product features beyond price but to cut prices to clear inventory.
Shahrul Farhan said the easier affordability of new cars often with very low downpayments has created new challenges for existing car owners looking to replace their vehicles.
“Trade-in values have dropped significantly as the used car market weakens, creating a domino effect that is also damaging the used car sector. Dealers are forced to buy low and sell low, with margins shrinking and many avoid holding large inventories to protect cash flow,” he added.
He added that the disruption has benefited consumers, who now enjoy more choices and more competitive pricing.
“For buyers, used cars are cheaper and there are more options available. But for businesses especially used car dealers and the preconditioned vehicle segment the impact has been severe,” Shahrul Farhan said.
He added that the market could take two to three years to stabilise as established automakers respond to the competitive pressure from Chinese brands.
Industry data by Mordor Intelligence estimates the Malaysian used car market was valued at about US$18.67 billion (RM74.1 billion) in 2025 and is projected to grow to US$19.86 billion in 2026, with the total value expected to reach about US$27.04 billion by 2031, representing a compound annual growth rate of about 6.36% during the forecast period.
Demand for used vehicles is supported by several structural factors, including rising household spending, affordability considerations and policy developments under the National Automotive Policy, which have gradually liberalised the automotive market and expanded the future supply of preowned vehicles.
In terms of vehicle type, sedans currently account for the largest share of used car transactions, while SUVs are expected to be the fastest-growing segment in the coming years as consumers increasingly prefer higher driving positions and better road clearance. The growing availability of SUV models in the secondary market is also contributing to the segment’s expansion.
The industry is also becoming more organised, although traditional independent dealers still dominate a large portion of the market. Organised platforms and certified preowned programmes are expected to bring transparency, vehicle inspections and warranty coverage when purchasing second-hand cars.
The Sun Malaysia
