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Malaysian auto sales sank 11% last year, recovery seen

Eileen Ng From Associated Press| January 26,2007

Malaysia's new auto sales dropped 11 percent last year because of tougher loan conditions and weak resale value, but the worst is over and sales are expected to bounce back this year, an industry group said Thursday.

Compact car maker Perodua surprisingly emerged the market leader for the first time, upstaging national carmaker Proton, whose share of Southeast Asia's largest passenger car market shrank to around a third last year, statistics showed. A decade ago, Proton made two-thirds of all cars sold in Malaysia.

General Motors Corp., Germany's Volkswagen AG, France's PSA Peugeot and two local auto groups are vying for a stake in money-losing Proton, which has an underutilized auto plant. That could help foreign carmakers consolidate their position in Asia's booming automotive market.

Analysts have said a foreign alliance, which can provide Proton with technology and access to the international market, was crucial to its survival.

Overall auto sales in 2006 fell to 490,768 units from a record high of 552,316 units in 2005, the Malaysian Automotive Association said in a report. But it predicted sales to rebound and grow by 1.9 percent this year to a half million vehicles.

Malaysia remained the region's biggest passenger car market with sales of 366,738 cars last year.

"2006 was a trying year. The inability to get financing was a key factor as well as a low resale value," association president, Aishah Ahmad, told a news conference.

"We are hoping the industry will improve in the second half of this year. It will still be competitive but I think the worst is over," she said. "Stock inventories are coming down and people are beginning to realize they can't get higher resale value."

The 2006 sales figure fell short of the association's forecast of 520,000 units as higher interest rates, stringent rules for loan approvals and shorter repayment period made financing a problem while a hike in retail fuel prices last year dampened sales, the report said.

Proton's share of Malaysia's passenger car market slid to 32 percent last year, from 40 percent in 2005, as sales deteriorated by 30 percent on-year to 115,538 units in 2006.

Perodua, which specializes in making compact cars and is partly owned by Japanese minicar maker Daihatsu Motor Corp., boosted sales by 14 percent on-year to 152,733 units in 2006 to raise its market share to 42 percent, up from 32 percent in 2005.

Sales of foreign cars recorded a slight drop, occupying 22 percent of the passenger car market, down from 23 percent in 2005. Japan's Toyota Motor Corp. led sales to capture 8 percent of the market followed closely by Honda Motor Co. with 7 percent.

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