The Malaysian Automotive Association said today it has cut its 2003 sales forecast to 420,000 units from an earlier estimate of 450,000 because of the Iraq war and Sars.

The MAA, which represents distributors, said consumer confidence in the first half of the year did not support strong sales as a result of the Iraq war and the outbreak of Severe Acute Respiratory Syndrome (Sars).

Total vehicle sales in the six months to June fell to 199,438 vehicles from the year-earlier 219,141, with passenger cars sold falling to 161,265 units against 182,706.

Sales to fall 6 percent

Against this backdrop, MAA said it was forced to cut its 2003 forecast on expectations that sales will fall another six percent over the second half of the year.

"Although consumers appear to be regaining confidence from the prospect of stronger economic growth, a buoyant stock market and the recent government stimulus package, demand in the second half of 2003 would not be as upbeat as that in the second half of 2002," it said in a statement.

"As such we have forecast that vehicle sales would be lower by six percent for the remaining six months of this year, compared to the last six months of 2002," it said.

"Due to poor sales in the first half of 2003, ... MAA now estimates (sales for the whole industry) in 2003 to be 420,000 units."

Asked if the worst is over for the auto industry, MAA president Aishah Ahmad told reporters: "The industry is very cyclical. I cannot say the worst is over as a lot depends on the economy."

Economic growth, she said, would be a key driving factor for car sales.

Aishah noted that sales of nationally-built cars fell 16 percent year-on-year in the first six months, in contrast to a 19 percent increase in sales of foreign marques.

Car prices unlikely to decrease

She said foreign carmakers were able to gain market share because of the introduction of new models and the lifting of price controls by the government in January this year which led to very competitive prices.

"Previously, the non-nationals were not able to increase or decrease their vehicle prices ... now they can adjust it easily," she said.

Aishah said car prices in Malaysia were unlikely to fall substantially when the auto market is liberalised in 2005 under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta).

This is because the government will raise local duties to compensate for the loss of revenue in tariffs, she said, adding that a local duty structure may be introduced in the 2004 budget to be unveiled later this year.

Under Afta, tariffs for most products in the region were slashed to below five percent in January but Malaysia, the biggest car market in the region, has delayed opening its auto sector until 2005. - AFP