KUALA LUMPUR, Dec 29 (Bernama) -- Malaysia's sluggish motor vehicle industry is set to recover and rev up sales next year driven by the launch of new models, industry players say.
They said despite the tougher financing conditions, higher interest rates and declining used car prices, the outlook for 2007 would be bright.
An analyst said the positive economic scenario resulting from the implementation of government projects under the Ninth Malaysia Plan, the launch of new models and the introduction of several replacement or facelift models by car manufacturers would whet the appetite and confidence of the purchasers.
"The outlook for 2007 should be better despite stricter credit conditions and lower second-hand car prices that will make competition harder next year," he said in an interview with Bernama.
He said demand would pick up, especially with the Chinese New Year just around the corner.
"People will not purchase cars towards year-end and they will wait for the new models in the New Year.
On Dec 19, the Malaysian Automotive Association reported that passenger car sales fell 8.81 percent in November this year to 26,610 units compared with 29,180 units in the corresponding year earlier.
Its president, Datuk Aishah Ahmad, expected the market condition to stay unchanged towards year-end as customers would defer taking delivery to 2007 and this would slow down sales.
Year-to-date, total passenger car sales declined 11 percent to 339,339 units from 381,339 units in the first eleven months last year.
"This year, we expect total vehicle sales to be less than 500,000 units against the 520,000 units which had been revised last July," she said in an e-mail interview.
She said the 2007 forecast would be announced end-January.
Aishah said the introduction of new models would help boost sales next year.
Meanwhile, an analyst from a local rating agency said car sales were not expected to see any significant improvement towards year-end despite the increase in promotional activities during the festive seasons and offer of incentives to clear existing inventories.
"Moreover, the current overcapacity (manufacturing and assembly) in the country appears alarming, estimated at some 850,000 units against demand of around 360,000 units per annum.
"The imbalance between supply and demand, slow overall demand growth and competitive pressures will continue to weigh heavily on industry profitability," he said.
On the National Automotive Policy (NAP), the analyst said it would provide a broad framework to raise competitiveness of local motor vehicle players.
However, he said, "its (NAP) immediate impact and consequently the expected benefits for local players are yet to be seen.
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He said the NAP has resulted in lower vehicle prices, but the overall impact on sales appeared to be subdued on the back of higher financing costs, tighter credit control and weak used car prices.
"However, the industry can recover slightly due to the launch of new models, particularly by Perodua and Proton slated for 2007, where the middle-income class can afford despite credit availability remaining an issue and banks continuing to be stringent on loan approvals," he said.
Meanwhile, a well-known car manufacturer, who declined to be named, said that the slowdown in car sales this year was due to a combination of excess local assembly and manufacturing capacity and an exponential growth in sales forecast.
"Cheap imports from neighbouring countries and negligible growth in the number of customers, compounded by the sudden drop in residual values of used cars as a result of new car prices coming down and heavy discounting to reduce build up inventories all sum up to a perfect crisis," he said.
While acknowledging that the NAP would be good in the long term, he said the immediate result (a reduction in total industrial volume with the fall in prices of new cars) would affect the used car prices.
He also anticipated the industry to consolidate and adopt self-restraint next year to reduce inventories in 2007.
"There are not enough local purchasers to absorb the excessive local production capacity and the market growth is not forecast to grow significantly to support the capacity," he said.
However, he believed that local car industry could achieve a spectacular turnaround next year.
"This can take place if all the distributors, assemblers, manufacturers and importers practise restraint in building up inventories and in sales forecast.
"This can also come with a policy to scrap some really old cars, imposition of stringent emission regulations, safety regulations and policies to curb the influx of cheap cars from the Association of South-East Asian Nations and China," he said.
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