VEHICLE sales in Malaysia are expected to grow by 1% this year to 608,790 units due to consumer confidence and new product launches, said market analyst firm Frost and Sullivan.

Frost and Sullivan associate partner Vivek Vaidya said new product launches this year will lead to higher total industry volume (TIV) of 608,790 units as compared to last year’s 602,762 units.

The TIVs for 2018 and 2017 were 598,714 and 576,635, respectively.

“New models that offer smart connectivity features such as remote vehicle access through smartphone apps will get higher customer interest and will induce purchase,” said Vaidya in a report of the firm’s industry outlook for 2020.

However, the industry still faces challenges from global headwinds and uncertainty due to the continued postponement of the national automotive policy (NAP), said Vaidya, who is also the firm’s senior vice-president of mobility.

An escalation in the Iran-United States conflict could also impact long-term investment decisions, he added.

“Global headwinds and repeated postponement of the National Automotive Policy have created uncertainty, both of which will need to be overcome by positive consumer sentiments to maintain favourable growth.

“Locally, factors expected to boost sales include increasing customer confidence aided by the stable political atmosphere and the increase in infrastructure investments.”

The government should reveal the NAP this year to provide the industry with a clear direction in the new decade, said Vaidya.

“There is an urgent need for the Malaysian automotive industry to modernise itself and offer exciting products and services in line with global trends,” he added.

“Industry players are relying on NAP 2020 to guide and seamlessly transform themselves.”

Unless and until the government reveals the NAP, growth in next generation vehicles such as electric cars, is expected to be flat, the report added. 

“New exponential growth areas such as electric vehicles should be supported by strong policy, infrastructure and business model support.”

What drives car sales

The stable political regime and infrastructure spending are two drivers to the industry’s growth this year, the firm said.

“Stable political outlook remains a strong foundation for the industry to grow further. This government’s vision of the automotive industry will impact it in the next two to three years.”

The government’s revival of mega infrastructure projects will also give a strong signal to investors and provide a source of growth for the next three to five years.

The 1% growth, however, can be seen as sluggish and is partly due to the already high rates of car ownership among Malaysians at about 450 cars per 1,000 people.

“Unless stringent end of life norm is implemented, explosive growth in cars looks difficult,” the firm said. – January 15, 2020.