Vehicle sales in Malaysia are expected to hit a record high of 440,000 this year after surging 12 percent year-on-year in the first half to June, the Malaysian Automotive Federation (MAA) said today.

Sales have rebounded since February to reach 224,254 in the six months to June, against 199,426 in the first half of 2003, said the MAA, which represents distributors.

Passenger car sales alone rose nine percent to 174,996, with national carmakers Proton and Perodua accounting for 80 percent and Japan's Toyota, Honda and Nissan topping the non-national segment, it said.

MAA chairman Aishah Ahmad said sales had picked up after confusion over car prices following the imposition of new duties in January was resolved, with consumers then accepting the higher prices.

The MAA raised its forecast for 2004 to 440,000 from 420,000 vehicle sales previously based on strong economic growth of around seven percent seen this year, rising consumer confidence, the introduction of new models, a strong share market and low interest rates, Aishah said.

This represents nine percent growth from last year and was based on the assumption that there will be no drastic change in duties in the government's budget to be unveiled early September, she added.

Rapid inroads

Aishah said foreign carmakers were making rapid inroads, with their share of the passenger car market jumping to 20 percent in the first half from 12 percent in the same period last year due to the entry of new players such as US auto giant General Motors with its Chevrolet cars and competitive prices.

This was at the expense of national carmaker Proton which saw its share drop to 45 percent from 53 percent last year, while Perodua slipped to 31 percent from 34 percent, she said.

She said the trend would continue with market liberalisation under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta), where duties on imported cars and auto parts would drop to 20 percent in January 2005 and to below five percent by 2008.

By 2010, she said Malaysia would have to eliminate all import duties to comply with World Trade Organisation (WTO) rules.

"The market is opening up and with the advent of Afta, sourcing from the Asean countries will make vehicles more affordable. Malaysians will have the ability to buy cars of their choice," she told reporters.

"There will be stronger growth for non-national makes. In the long-run, even though national cars used to have 80 percent market share for passenger cars, that is not going to continue (on a level-playing field). It will go down."

She said the MAA expected car prices to remain stable next year but sales may be hit if local duties are raised, economic growth eases and interest rates climb up.