Malaysia's auto sector remained gloomy in the September quarter as consumers delayed purchases amid uncertainties over car prices when the market is liberalised under a regional free trade pact, a private think-tank said today.

The Malaysian Institute of Economic Research (MIER) said its third quarter auto industry index improved to 91.20 points from 75.3 points in the second due to gains in sales, production and orders.

"However, the overall index is still below the 100-point threshold level, which shows that the sector was still underperforming," it said. "The survey showed that the auto sector is still weak but some stabilising trends are appearing."

Despite a government announcement that car prices would not fall under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta), consumers are eagerly waiting details of new tariff adjustments to be unveiled before year-end, MIER said.

"It is generally believed that consumers are still delaying their vehicle purchases in anticipation of a clearer policy stance with regard to Afta tariff rates that will impact on car prices," it said.

Cheaper cars expected

Consumers are also holding out for "better deals" amid a price war by well-known foreign car brands, it added.

Tariffs on imported cars in Southeast Asia fell below five percent in January under Afta but Malaysia obtained a reprieve for its auto industry until 2005.

Prime Minister Mahathir Mohamad last month said the government would impose excise duties on imported cars from January to offset losses in revenues from import tariffs.

Japan has expressed concern that the move may penalise its carmakers if the new tax structure discriminates between national and non-national cars.

MIER noted that any excise duty would have to be "non-discriminatory" under World Trade Organisation rules.

It said some survey respondents expected a slight improvement in sales in the fourth quarter but most felt sales and production would remain unchanged "which shows that the degree of optimism is not widespread and that uncertainty reigns."

Demand will continue to be affected by consumers' wait-and-see attitude over the government's Afta policy, it said.

"Over the medium-term, once the uncertainty regarding Afta is cleared, faster economic growth will help lift the industry out of its present gloom," MIER added. - AFP