Malaysia's vehicle market hit a new record high in 2005, with total volume jumping by 13% to 551,042 units.

Sales were lifted by strong economic growth - estimated at 5.3% for the year - and low interest rates. Foreign direct investment almost doubled during the year, while domestic consumption and exports were also strong.

Passenger car sales rose 5.3% to 400,835 units, while commercial vehicle sales, including SUVs, minivans and utility vehicles, rose more than 40% to 150,207 units.

Toyota saw particularly strong growth, boosted by strong sales of its Daihatsu-based Avanza MPV and the larger Innova MPV, both assembled locally from kits imported from Indonesia. Overall, Toyota's sales rose by 76% to 91,003 units.

Naza also saw strong sales growth, of over 70% to 17,665 also thanks to strong demand for the Ria MPV, based on the Carnival model.

Perodua's sales were up 14.7% to 139,680 units, with the Myvi launch in the second quarter of 2005 lifting the company's performance.

Proton saw a slight drop in volumes during the year to 166,812 units, but its market share took another battering - dropping to just over 30%. Its share of the passenger car segment was higher, at 40%. Delays in bringing new products to market and an intensification of competition - particularly from the Japanese - were to blame.

Market protection overall is slowly being reduced, but remains significant. Proton is under considerable pressure to develop a long-term strategy with a strategic partner, something it has failed to do so far. The company has little in the way of exports and the domestic market offers few opportunities for growth. Its ability to develop new products and improve its supply chain is also limited.

Collaboration talks have resumed with Volkswagen, but unless Proton is prepared to relinquish control of the company or to sell its new Tanjung Malim plant to the German carmaker, collaboration will likely be limited to ad hoc technology transfer programmes.

The Malaysian Automotive Association (MAA) is forecasting domestic market growth to continue this year, albeit at a moderate 3% - with volume rising to 565,000 units. The effects of strong GDP growth - forecast to be 5.5% in 2006, and continued low interest rates will be offset by "high oil prices and higher prices of multi-purpose vehicles and four-wheel drives due to higher excise duties," according to MAA president Datuk Aisha Ahmad.

The higher duties on MPV and SUVs are protective in nature, however, as this will shift market focus in favour of passenger cars - Proton's strongest area.

Tony Pugliese