While we’re waiting for the final month’s sales figures of 2007 from the Malaysian Automotive Association (MAA), which will be released late this month, one company has already offered a forecast for the Malaysian market in 2008 and it is a positive one. According to Frost & Sullivan, a global growth consulting company, the market will grow by at least 7% this year to 521,000 units – on the assumption that 2007 closes at 487,000 units.

Presenting the 2008 forecast yesterday, Kavan Mukhtyar, Partner & Head of the company’s Automotive & Transportation Practice (Asia-Pacific), based the optimistic figure on the expectation that a substantial number of the 1.27 million Malaysians who bought new vehicles between 2001 and 2003 will be changing their vehicles this year.

“Consumers are more likely to replace their vehicles near the end of their loan period if the outstanding amount can be covered by the trade-in value offered,” he explained, “and in recent months, values of used vehicles have stabilized so we expect replacement car-buyers to re-emerge in the market.”

During 2006 and much of 2007, many motorists had deferred their purchases because resale values had fallen after new vehicle prices dropped slightly when the government lowered the import duty rate to 5% meet its obligations as an AFTA signatory. This slowed market growth, causing a decline of 10.9% compared to 2005 volumes, with a large proportion of sales coming from first-time buyers..

In the past 6 months, however, the market has been picking up and even used car dealers have been finding that their once excessive stocks have diminished to the point that they actually need to start looking for used vehicles. “When there is demand, then the prices offered for used cars would rise and we see this happening in recent months,” said Mr Mukhtyar.

Because of this development, it is likely that popular models will have the same value as a year ago, as Frost & Sullivan researchers have learnt. In one example given by Mr Mukhtyar, it might even be possible for the owner of a Proton Iswara 1.3 Aeroback Manual purchased in 2002 to get some money back if he or she trades in the car for a new one costing RM33,000 (see chart below).

Higher fuel prices may see increase in sales of smaller, more economical models

A number of new models to be launched in 2008 should spur buyer interest

While expecting growth in sales, Mr Mukhtyar nevertheless warned that increased cost of fuel, which is expected in 2008, as well as toll rate hikes, could also affect sales as the cost of vehicle ownership goes up. He said that the forecast did factor in a possible rise in fuel prices and if the assumption made on the increase was lower than what would actually be the case, then the growth might not be 7%.

“Higher cost of vehicle ownership would likely shift buyers towards more fuel-efficient and lower maintenance vehicles,” he said.

Even at around 500,000 units annually, the market is still not saturated because a significant portion of the population under 30 years of age and each year, an estimated 17,000 people enter the workforce. “There are also about 30,000 to 40,000 graduates annually so there will be a ready pool of buyers in years to come,” Mr Mukhtyar said.

New models will spur buyer interest and much attention is focussed on the Proton ‘BLM’ which is expected to make its debut this month. This model, together with the continuing high demand for the Persona, should be among the main contributors to sales and also enable Proton to more effectively challenge Perodua for the No. 1 position. Frost & Sullivan’s forecast is that Perodua will maintain pole position and take around 34% market share while Proton could grab 24%. In the non-national segment, Toyota will continue to dominate and capture at least 16% of the market.

From discussions with various companies, Frost & Sullivan also managed to compile a list of some new models which will be launched in 2008 and they are: Nissan Sentra (which may also be called the Sylphy), Honda Accord, Toyota Corolla Altis and a successor to the Perodua Kembara. A facelift for the Myvi, last year’s bestseller, is also likely.

By segment, passenger cars will account for 80% of the market but demand for MPVs and SUVs could be affected by higher fuel prices and also competition from more spacious compact models. While the pick-up segment may post slower growth if diesel prices rise, commercial vehicles should see a 2.7% increase, mainly from light trucks. This will be due to increased spending in projects under the Ninth Malaysia Plan and the growth corridors in the north and south.

November 2007 sales (Source: MAA data, Analysis: Motor Trader)

January ~ November 2007 cumulative sales (Source: MAA data, Analysis: Motor Trader)