THE local automotive industry will continue to rev up with sales expected to hit 638,000 units this year, according to the Malaysian Automotive Institute (MAI).
The institute's forecast is slightly lower than the Malaysian Automotive Association's (MAA) latest outlook, which expects sales to grow by two per cent to 640,000 units.
MAI chief executive officer Madani Sahari noted that in January alone, 58,500 units were sold, a jump from 40,000 units a year ago.
Official sales numbers for last month are most likely to be released by MAA next week.
For the past five years, the local automotive sector's compounded annual growth rate had appreciated by about 2.5 per cent.
On the overwhelming sales last year when the total industry volume (TIV) hit a record high of 627,000, Madani pointed out that it was due to a much improved second half, especially from mid-November to December.
The key contributing factor was lower vehicle prices through on-the-road price cuts and related rebates. In other words, it was due to price war, which is the most aggressive seen to date.
"The price war was driven by the need for the vehicle manufacturers to remain competitive, resulting from the commencement of industry liberalisation," he said in an interview.
The price war is not expected to abate, and this, together with new model launches, will help drive industry sales.
The upcoming launches include Proton's Preve hatchback, the all-new Honda CR-V, new Toyota Vios, facelifted Honda Jazz (petrol version), new BMW 3-series GT, new Nissan Leaf and new Mitsubishi MiEV.
Family cars remain the most po-pular models in the domestic market, especially models with high fuel efficiency such as Perodua MyVi, Proton Saga, Proton Preve, Honda City, Toyota Vios, Hyundai Elantra and Kia Forte.
There has also been an increase of enhanced fuel-efficient vehicles from the likes of VW models (Polo and Passat) and Mazda CX5.
Madani said the Asean Free Trade Area (AFTA) has opened the doors for fully imported models at competitive prices. And the price war will lead to an uptake in multi-purpose vehicles (MPVs), cars in the B segment (family small sedan) and C segment (mid-size sedan).
Over the past six months, the government had to up the ante with EEV, or energy-efficient vehicles, drawing newcomers and fresh competition in the country, Madani noted.
"Automotive manufacturers which do not have a presence in the region are also keenly waiting for the details of the National Automotive Policy review so as to position themselves in this part of the world," he added.
Analysts have said the size of the passenger car segment in 10 Asean countries is luring automotive giants to set up facilities in this part of the world.
Waiting to pounce on the prospect are Renault, General Motors, Mazda and top Chinese models like Great Wall and Geely.
Frost & Sullivan has forecast that hybrid vehicle sales will reach 35,000 units this year from an expected 18,000 units last year.
MAI estimated that the region's current 3.2 million passenger car market can increase to 3.4 million by year-end before rising to five million in 2015.
With the Asean Economic Community coming to the fore in 2015, followed closely by the lifting of restrictions under the bilateral free trade pacts with Japan and Australia coming into play, automotive players have to undergo a transition period to adjust to the new reality of more CBUs entering this market come 2016, Madani said.
In the case of Malaysia, it is estimated that sales will hit the 720,000 to 750,000 range by 2015, before reaching one million in 2020.
A pre-packaged set of customised incentives to support the EEV sub-sector will be announced in a couple of months to help Malaysia take pole position for the sub-sector.
"The new segment has drawn the interest of not only Japanese stalwarts Toyota and Honda but also others who eye the hybrid engines and green technology as growth areas for their future business plans," he added.
MAI, in the meantime, is pressing ahead with its training programme to improve the local supply chain.
It has planned at least 5,000 sessions for manufacturers and after sales as well as for EEV technology development.