Total new vehicle sales for 2011 stood at 600,123 units, down by 0.8% year on year (y-o-y). This figure was made up of 535,113 passenger cars and 65,010 commercial vehicles.

The final sales outcome for the year was slightly worse than BMI had anticipated. However, this reflected several negative factors, notably the extensive flooding in Thailand over the final two quarters of 2011, which disrupted supplies of both parts and new vehicles. Moreover, there was a tendency, identified by the Malaysian Automotive Association (MAA), for Malaysians to wait for new 2012 registrations, which meant that sales for December were also down, by 0.7% month on month (m-o-m). Consequently, we believe that 2012 will prove a better year for the Malaysian new vehicle sales market, and we are currently forecasting an 8.3% increase in new car sales and a 9.2% increase in commercial vehicle sales.

On the production side, Malaysia produced a total of 533,515 vehicles in 2011, down by 6% y-o-y. This again reflected the disruption to supplies caused by the Thai flooding over the latter part of the year. A total of 488,261 passenger cars and 45,254 commercial vehicles were produced over the year.

In 2011, local carmakers Perodua and Proton remained the dominant players in the Malaysian new car sales market, with their models accounting for all of the top 5 best-selling cars in the country. The bestselling model in Malaysia was Perodua's Myvi subcompact, followed by Proton's Saga city car. In third position was the Perodua Viva multi-purpose vehicle (MPV), followed by Proton's Persona compact sedan and then Perodua's Alza MPV.

The most popular foreign manufacturers in Malaysia are Toyota Motor, whose Vios and Hilux models were respectively the sixth and seventh best-sellers over 2011, and Nissan Motor, whose Grand Livina MPV was the ninth most popular car sold in Malaysia over the past 12 months.

New beginning for Proton

In January 2012, it was reported that local conglomerate DRB-Hicom had bought a controlling interest in debt-laden Malaysian carmaker Proton from state-owned Khazanah Nasional Bhd for a total of MYR1.29bn (US$410mn). While the acquisition could signal the end of Proton's long search for a new strategic partner since Mitsubishi Motors sold its stake in 2004, we believe it should also help DRBHicom in terms of global expansion, making it more of a mutually beneficial deal than it may first appear. That said, BMI notes the considerable risks being undertaken by DRB-Hicom, not least Proton's growing debt pile.

Proton needs a helping hand in making its business more efficient and competitive. After dominating the Malaysian passenger car market alongside fellow national firm Perodua for decades under state protection, the liberalisation of the industry exposed the carmakers' competitive shortcomings and their combined market share was soon eroded by incoming international competition. Teaming up with DRBHicom should create some synergies for both, which could improve operating costs. Between them, they will have access to 10 production plants in the country (two owned by Proton and eight for DRB-Hicom).

The deal, tipped to be the biggest in the Malaysian auto sector since 2000, should be completed by Q212. Going in Proton's favour is the blessing of the carmaker's founder and Malaysia's former prime minister Mahatir Mohamad, who said in December 2011 that DRB-Hicom is 'well-run' and has the capacity to turn around Proton without hurting its vendors.

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