A CHALLENGING PERIOD FOR AUTOMOTIVE INDUSTRY NEXT YEAR

By Mahanum Abdul Aziz

KUALA LUMPUR, Dec 26 (Bernama) -- The automotive industry is in for a
challenging period in 2009 as slower economic growth will translate into lower
sales volume.

For the national carmaker, Proton Holdings Bhd, this means a success in
overseas will be necessary to offset a smaller domestic market.

The country's gross domestic product (GDP) is projected to grow at 3.5
percent next year.

In line with the slower GDP growth, the total industry volume (TIV) is
expected to contract between 10 and 13 percent in 2009 due to slower consumer
spending.

Another factor that could hold back sales next year is financing as the
financial and lending institutions will be extra cautious in approving loans due
to uncertainties in the global economy.

Malaysian Automotive Association president Aishah Ahmad said consumers
will be also cautious with their spending next year following the uncertainties
in the economy.

"Normally, during an economic slowdown, consumers would not want to make a
big-ticket item purchase. They would simply wait for the situation to be over,"
she told Bernama when commenting on the outlook for the automotive industry next
year.

However, demand for small cars like the MyVi, Viva and the new
Saga will remain intact, she said.

Aishah said the upcoming new Proton MPV multi-purpose vehicle (MPV) which is
expected to be launched in March next year will provide some degree of cushion
for TIV sales next year.

On the overnight policy rate (OPR) cut recently, Aishah said it could lead
to reduction in the interest rate for motor vehicles hire purchase and thus
encourage buying interest among customers.

Central Bank of Malaysia recently cut its benchmark OPR by 25 basis points
to 3.25 percent from 3.50 percent.

Next year, the International Trade and Industry Ministry is expected to
submit the review of the National Automotive Policy to the Cabinet.

The revision of NAP is expected to look into ways and means to stimulate the
automotive industry.

Overall, vehicle sales in 2008 is expected to be still good despite
uncertainties in the global financial market.

Cumulative vehicles sales in the first 11 months this year rose to 508,290
units from 444,932 in the same period of 2007.

As for Proton, its strategy of offering the right car at the
right time and at the right price put it on the right track to regain its share
in the local automotive market and overseas as well.

The launching of Proton Persona and the new Saga models brought in new
hope for Proton, which now has presence in more than 20 countries including
the United Kingdom (UK), Australia, New Zealand, Indonesia, Thailand and
Singapore.

Proton managed to return to the black during the financial year ended March
31, 2008 whereby it chalked up a pre-tax profit of RM162.218 (US$=RM3.60)
million compared with a pre-tax loss of RM618.129 million previously.

Its revenue jumped to RM5.629 billion from RM4.912 billion.

For the first six months ended Sept 30, 2008, Proton registered a pre-tax
profit of RM115.308 million compared with a pre-tax loss of RM41.896 million in
the corresponding period last year due to the increase in domestic sales
and improved margins, arising from better product mix and lower discounts.

As of October 2008, Proton's market share was 33.3 percent with a total of
122,351 units of cars registered in the country since January.

-- BERNAMA