Malaysia Autos Report Q2 2008

Malaysia's automotive sector saw a slight decline in new vehicle sales, of just 0.7% year-on-year (y-o-y) in 2007. Although not in itself a turnaround, it was enough to suggest that a recovery in the sector may not be far away. BMI's recently published Malaysia Autos Report shows the drop was not as bad as earlier projections, based on a very poor first half to the year, had anticipated. Positive monthly sales growth from June onwards, supported by civil service pay rises and economic growth, rescued the yearly total, which reached 487,176 units. The Malaysian Automotive Association (MAA) now expects sales to grow by 4.7%, to 510,000 units, in 2008, in line with BMI's revised forecast of 5% growth, to 511,535 units.

There was also good news for national manufacturer Proton. Despite failing to win back leadership of the market from local rival Perodua in 2007, the company returned to profit in the third quarter of its current financial year, achieving its first quarterly profit in five quarters. For the three months ending December 2007, the company booked a net profit of MYR10.329mn, compared with a loss of MYR281.455mn in the same period of the previous year. Sales also rose, by 51%, to MYR1.454bn. In the absence of an international strategic partner, Proton has moved into other Asian markets including China and Indonesia, which should lead to an increase in overseas sales.

In BMI's new Business Environment Ratings for the regional automotive industry, Malaysia ranks ninth with a rating of 50.3 from a possible 100, although there is room for improvement in terms of the country's regulatory environment. While the country is a leading light of the ASEAN trade bloc, which has made it a popular choice for regional production activities in the autos sector, there is the potential for greater things if a proposed free trade agreement with the US is finalised. In terms of the market itself, however, production growth potential receives an average rating, while potential sales growth is low in comparison with its peers.

Although the two leading national carmakers continue to control more than 63% of the market, both are losing out to imported brands. Proton saw its market share drop to 26.6%, while Perodua saw its share fall to 36.6%. BMI expects international brands to grow in significance, particularly following the signing of a joint venture between DRB-Hicom and General Motors. Another threat to the domestic manufacturers is Toyota, which claimed around 18% of sales. The Japanese firm should also receive a boost from its Lexus premium brand, which is targeting 50% growth in 2008.