New vehicle sales in Malaysia are seen falling 12.4% this year, according to a local auto industry group.

“Consumers are expected to put off buying motor vehicles as we (Malaysia) will experience a slower economic growth,” Aishah Ahmad, president of the Malaysian Automotive Association, told Agence France-Presse (AFP). “People will hold back buying (vehicles) due to employment market uncertainty,” she added.

The industry group has forecast sales down from 548,115 units last year to 480,000.

Malaysia’s economic growth is expected to slow down to 3.5% this year from an estimated 5.0-5.5% last year, the report said.

Sales last year grew 12.5%, higher than the 510,000 units forecast earlier, led by strong economic growth and positive consumer sentiment in the first three quarters, the association said in a statement.

Aishah said 2008 sales were the second highest after 2005, when 552,316 vehicles were sold.

The industry chief said despite weak sentiments, the sector was unlikely to see the layoffs or sharp cuts in production being experienced in the United States and Europe.

“We do not expect industry players to lay off their workers. So far there have not been any layoffs. But they will watch their costs closely,” Aishah said.

Aishah told AFP Malaysian manufacturers including Proton and Perodua would have to roll out new models and produce compact size vehicles “to sustain buying interest”.

“Everybody will be hit in 2009. But manufacturers and franchise holders who launch new models, manage costs and who have good brand names will be less hit,” she said.