New vehicle sales in Malaysia fell for a second straight year in 2007 but will rebound to grow 4.7% this year, due to a strong economy and the launch of new models, an industry group told a news agency today (29 January).

Sales in south-east Asia's largest passenger car market dipped 7% year on year to 487,176 units last year, the Malaysian Automotive Association told the Associated Press (AP).

But association president Aishah Ahmad added that the 2007 total beat the group's forecast of 460,000 units, due partly to less stringent approvals for hire-purchase loans, the introduction of new models and higher spending power after a pay rise for civil servants.

The association forecast vehicle sales to rise to 510,000 this year on the back of projected economic growth of more than 5%, Aishah told AP.

"The positive trend in the second half of 2007 is expected to continue into 2008, which (will be) supported by the launch of additional new models," she told the news agency.

An anticipated increase in fuel prices isn't expected to hurt overall volumes, although it may prompt consumers to choose smaller engine-capacity vehicles, she said. The association projected sales to rise further, to 530,000 units in 2009, and to 580,000 units by 2012.

The association said local compact car maker Perodua was the best-selling car brand in 2007, retaining its leadership for a second straight year with a 33% market share.

Rival, and national car maker, Proton had a 24.2% share, up from 23.6% in 2006. Toyota secured 16.8% of the market, followed by Honda with 5.8%, the Associated Press said.

AP noted that former Malaysian prime minister Mahathir Mohamad warned earlier on Tuesday that state-owned Proton may lose out if it fails to secure a foreign partner in the long-run - the government in November abandoned talks on strategic tie-ups with Volkswagen and General Motors Corp.

Proton is on track to reverse its fortunes, it told the news agency, citing improvements in domestic sales and exports.

However, Proton "may fade away," warned Mahathir, an adviser to Proton, in an interview with journalists, AP noted.

"There will not be any abrupt stop but it just will not be able to compete with other makes in the local market and in the foreign market especially," he was quoted as saying.

AP noted tha Proton returned to profit in the three months to the end of September, rebounding from five straight quarters of losses, and has unveiled plans to expand in China and India to boost long term earnings.

But, the news agency cautioned, most analysts say the carmaker is unable to sustain its performance in a competitive market and will need a foreign partner to secure its future.

"We are in a very competitive business. Motorcars keep on changing in terms of technology every year and if we are behind in tech, we will not be able to compete," Mahathir reportedly said.

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