Characteristics and trends / Malaysian Car Industry

Characteristics and trends

The automotive industry in Malaysia performed better than expected with total sales of 396,381 units in 2001 from 343,173 units in the previous years. Spurred by low interest rates and the introduction of new models, the industry grew by 16 per cent, which was double the target of eight per cent. Proton dominated the market with 64 per cent of total passenger car sales. Perodua came second with a 29 per cent market share. In 2004, the Malaysian Automotive Association(MAA) is projecting vehicle sales to grow by three per cent to 410,000 units. MAA is projecting passenger car sales to grow by four per cent this year to 340,000 units, commercial vehicle sales to expand by one per cent to 38,000 units and 4WD vehicle sales to rise by two per cent to 32,000 units. It attributed the forecast to the expected improvement in the Malaysian economy in the second half of 2003 as well as bonuses and wage increases for civil servants. Furthermore, an additional RM1 billion car financing fund for teachers was given. Last but not least was the industry players' aggressive promotion campaigns and attractive discounts.

There are 12 car assemblers in the country, in addition to the two national car companies, Proton and Perodua. Both companies dominate the industry due to government protection policies and together, they command 93 per cent share of the total passenger car sector. However, they face significant challenges in terms of competition, profitability and the impending effects of the ASEAN Free Trade Area (AFTA). The domestic car industry is expected to come under pressure due to the World Trade Organization’s (WTO) efforts to reduce trade barriers and the scheduled reduction in tariffs under the AFTA initiative. In view of this, several non-national manufacturers have begun to position themselves further into the domestic market. Existing government policies do not permit the establishment of 100 per cent foreign-owned plants to supply to the local market. Joint-ventures with majority Malaysian equity are recommended. Foreign investment that brings in new technology is also highly sought after.