Foreign carmakers dominate Malaysia show

KUALA LUMPUR, Sept 4, 2003; Reuters reported that Malaysia's biggest car show opened on Thursday with an armada of foreign manufacturers on parade, their sights trained on the day in 16 months' time when high tariff walls are set to come tumbling down.

National car maker Proton PROT.KL has long dominated the Malaysian car market which, until this year, was the largest in Southeast Asia. It was overtaken by Thailand, which has a population of 64 million compared to Malaysia's 24 million.

Worryingly for Proton, car mad Malaysians are eyeing foreign brands as they look forward to import duties as high as 300 percent being slashed in order to meet the requirements of the Association of South East Asian Nations Free Trade Area (AFTA).

Raised on Protons, there is clearly some anticipation that Malaysians will be looking to trade up for bigger cars after January 2005.

"With AFTA around the corner there is a bigger foreign presence now, especially those selling higher-end capacity vehicles," said Aishah Ahmad, head of the Malaysian Automotive Association industry body and a senior Ford executive.

There has been a flurry of new launches in Malaysia, with General Motors GM.N of the United States rolling out its Chevrolet models locally and Germany's BMW due to unveil its new 5-series here later this month.

"They want their presence to be felt," Aishah told Reuters as he surveyed the profusion of car models from 21 countries at the KL Motor Show.

Under AFTA rules, import tariffs will be cut to between zero and five percent. Malaysia was given an extra two years to get its domestic industry into shape to face the competition.

The government is expected to introduce non-tariff duties to make up for revenue lost from import duties, but it has not said what form these would take.

"We would appreciate a statement from the government on AFTA," said an executive at the Malaysian arm of German automaker DaimlerChrysler who asked not to be named.

One industry executive said there may be little change come 2005. "I believe at the end of the day, the total cost of the vehicle is not going to be reduced that much," Aishah said.

Another senior industry executive who asked to remain anonymous told Reuters he believed Proton would continue to benefit from some kind of preferential duty treatment after 2005.

But in the meantime, firms such as Toyota Motor Corp and Honda Motor Co have become more aggressive, eating into Proton's market share.

Last month Proton posted a 45-percent drop in first-quarter earnings and warned of continuing tough times ahead.

For the first six months of 2003, Proton's market share fell to 53 percent from 62 percent in the same 2002 period, with Honda and Toyota of Japan both gaining a bigger share due to new launches.

Some people are holding off from buying new cars in the hope prices will come down.

Prices of used cars have fallen sharply after mainly new Japanese models, backed by attractive financing, hit the second-hand market.

New passenger car sales fell 12 percent to 161,265 units in the first half of 2003 from the same period a year earlier.

Overall, auto sales in Malaysia could reach 420,000 units this year, against Thailand's projected sales of 480,000 to 500,000.

Some 350,OOO visitors are expected at the KL Motor Show. Aishah said he expected sales to surpass the 250 million ringgit ($65.7 million) generated by private and corporate buyers in the last show in 2000, regardless of the AFTA reforms.