Vehicle sales in Malaysia rose by over 17% year-on-year to 43,736 units in May, according to data released by the Malaysian Automotive Association, despite a slowdown in economic activity in the country. GDP growth in the first quarter slowed to 5.7% in the first quarter, down from 7.5% in 2004, and is expected to have weakened further in the second quarter.

Cumulatively, vehicle sales amounted to 213,631 units in the first five months of 2005 - 17.5% higher than the year-earlier figure of 181,792 units. Vehicle production also rose sharply during this period to 221,927 units, up from 173,262 units a year earlier.

Strongest sales growth was among non-national brands, helped in part by changes in excise taxes and duties at the end of last year, the generally more liberal trading environment and new model launches. The market remains strictly controlled by the government, however, with approved permits (AP) to import vehicles allocated by the government on a seemingly arbitrary basis. Tax refunds are also awarded to the national car companies to help protect market share.

Separate data for the first four months of the year show national car manufacturer Proton's domestic sales volumes rose by 5.7% to 51,484 units, though its market share continued shrink as it has done for the last few years. In the January-April period of this year, it market share was 30.3% compared with 34.6% a year earlier. Perodua, now majority-controlled by Daihatsu Motor of Japan, saw sales rise by 14.5% to 42,046 units during the same period, but its market share also slipped - to 24.8% compared with 26.2% a year earlier.

Non-national car brands continued to outperform, thanks with more aggressive pricing campaigns and new model launches. Among the biggest gainers was Toyota-Lexus, which enjoyed a massive rise in sales volumes to 23,426 units -57% more than the 14,942 units sold in the first four months of 2004. The launch of the Avanza compact utility vehicle last year, assembled by Perodua, has helped enormously - as has the Innova MPV. Both models are imported in knocked down form from Indonesia. The Kia and Hyundai brands also made very significant gains.
Nevertheless, Proton and Perodua are both fighting back with two important model launches in the last two months. Proton launched a 1.2L sub-compact passenger car, called the Savvy, which retails at between RM41,000-43,000. The car it is not fitted with Proton's own Campro engine as the range does not comprise 1.2L units.  Initial production is expected to be around 2,000 units per month. Two additional new Proton models are expected to be launched in the second half, according to company officials.

Perodua this month launched the Myvi sub-compact model, based on the Daihatsu Boon. It comes in 1.0L and 1.3L engine versions, which are priced at RM41,200 and RM51,300 respectively. The model range is expected to provide stiff competition to Proton, which derives almost 40% of its domestic sales in the RM41-51,000 price segment.
The outlook for the market for the remainder of the year remains good, despite inflation continuing to creep up - driven primarily by high oil process and withdrawal of fuel subsidies. Private consumption remains strong and public spending will likely rise. After a further drop in GDP growth expected for the second quarter of the year, to around 5.1%, economic activity is expected to pick up once again. Local economists now expect full-year economic growth to be 5.5% this year. New model activity under domestic and foreign brands should also help overall volumes.

Tony Pugliese

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