Overview of the Malaysian Automotive Industry

The automotive industry in Malaysia has been growing quite steadily over the last few years. Apart from the Asian economic crisis in 1997, the automotive industry has recorded a continuous growth since 1995. In Malaysia, the establishment of PROTON in 1985, subsequently PERODUA in 1993 had fueled the growth in local part suppliers. The development of the local motor vehicle industry has had useful economic functions, amongst other, the generation of employment and helped the establishment of supportive industries Presently, Malaysia has become one of the region's largest auto markets and holds a dominant position in vehicle sales among ASEAN countries.

The industry sales volume was on an uptrend until 2003 in which the total vehicles sold declined 6.9% year-on-year mainly attributed to the poor performance of the national carmakers, Proton and Perodua. The weaker performance was due to prospective car-buyers’ wait-and-see attitude, in anticipation of lower car prices with the advent of the Asean Free Trade Area (AFTA) and rolling out of new Proton models. This directly affected sales of existing Proton models.

The passenger cars segment continues to dominate the industry, accounting for 80% of total industry volume for the past five years. As seen above, non-national makes achieved better sales at the expense of Proton. Going forward, passenger cars will remain the most lucrative segment compared to other segments.

While Proton remains the market leader in the local automotive industry, it experienced a tough year in 2003 as its market share declined by approximately 11.0%. This was mainly due to the absence of new models and higher sales recorded by new models launched by several non-national marques namely Toyota, Honda, Kia and Chevrolet. The non-national models with low medium engine capacity and attractive features were more affordably priced, effectively narrowing the price gap. In contrast, sales of Perodua, the other local automaker had gained momentum as a result of less competition within the compact car segment.

Toyota managed to maintain its market leadership in the non-national segment, with an increase in sales volume by 73% that helped to almost double its market share followed by Honda and South Korean-based Kia. Nissan dropped one notch to fourth place with no new model launched after its successful Sentra model.

In year 2004, Proton has geared up to regain its lost ground as it plans to unveil three new models
which are benchmarked against German’s specifications and powered by the much-awaited locally made CAMPRO (Camshaft Profile) engine that will enable Proton to significantly reduce its operational and production costs. While Proton aims to achieve economies of scale from its new Tanjung Malim manufacturing plant, it is also common for an automaker to do well in the year it launches new model(s).

The introduction of the new tariff structure for cars has seen price differential between national car makes and foreign car makes relatively unchanged. This somewhat demonstrates the Government’s commitment in preserving the dominance of the national car manufacturers in the domestic car market. Effective 1 January 2004, import duties on CKD passenger cars imported from Asean countries are reduced to 25% for all engine capacities, and import duties on CBU cars will be between 70% to 90% depending on engine size. However, the excise duties on both CKD and CBU imports of passenger cars from the Asean and non-Asean countries will range from 60% to 100% based on engine capacities, compared to 55% for all capacities previously. Cars are likely to be more expensive as a result of the new tariff structure, instead of being cheaper as expected earlier.

For the first five months of 2004, total vehicle sales were 6.3% higher than the corresponding period last year. At the start of 2004, vehicle sales were slow attributed to weaker sales recorded in January 2004 and early part of February 2004 when there is still uncertainty over the new tax rates. The industry sales rebounded after mid- February 2004 where monthly car sales for March, April and May 2004 had posted growth year-on year.