MALAYSIA'S automotive sales are headed for a second year of contraction after industry volumes fell by 12 per cent in the first half of the year. The Malaysian Automotive Association (MAA) has cut its earlier forecast by 8 per
cent, and now expects 460,000 vehicles to be sold this year instead of half a million. This would be 6 per cent less than the 490,768 sold in 2006.

On a brighter note, vehicle sales rose 4per cent in June over May to 37,505 units, aided by new model launches. MAA president Aishah Ahmad said the trend was expected to continue in the second half but cautioned that weak prices for used cars and more stringent vetting of vehicle loans could soften sales.

Actual production of vehicles has this year been declining twice as fast as sales, as dealers have not sold all the cars made earlier. Malaysia is still the biggest market for passenger cars in Asean, but MAA members agree that "sentiments were not as good" with future government policies in the highly regulated sector being seen as crucial.

Passenger cars accounted for 91 per cent of the total motor vehicle market in the first six months. Unlike the mid-segment market, two premium makes posted significantly strong growth. BMW sold 1,474 passenger cars in the first half - more than double the 601 units sold in the same period last year. Mercedes-Benz sold 1,186 cars, up from 839.

Malaysia's second national car company, Perodua, took nearly 38 per cent of market share, followed by Proton with 23.3 per cent. At its peak, nearly two out of three passenger cars sold were Protons, but the languishing car company is now in talks with Volkswagen about forming a strategic partnership.

Toyota was the most popular foreign marque, accounting for nearly 16 per cent of cars sold. The market is subject to the National Automotive Policy, which was introduced in late 2005. It earmarked five or six centres throughout the peninsula as designated automotive manufacturing or production centres.

However, MAA president Ms Aishah said "Thailand has advanced far ahead of Malaysia and it will take us some time to progress," referring to the country's ambitions to be the "region's Detroit".

The government had recently told domestic franchisees they would be allowed unlimited import permits (commonly referred to as APs) for Asean-made vehicles after Thailand increased the agreed 5 per cent import duty on Malaysian-made vehicles to 20 per cent in retaliation for Malaysia restricting the number of APs to distributors wanting to import Thai-made cars.