Car sales in Malaysia slumped in March and will remain soft in coming months due to rising interest rates and pricing uncertainty, experts said today.

A total of 33,709 passenger cars were sold in March, down 15.1 percent compared with the 39,708 units sold in the same month last year. Car sales reached 40,797 in January and 36,200 in February.

Economists said that sales may only pick up during the second half of the year after consumers digest the impact of the National Automotive Policy announced in late February which has seen vehicle prices fall.

"There is this wait-and-see attitude by consumers on whether car prices will come down further," said SBB Securities economist Manokaran Mottain.

Manokaran said a recent hike in interest rates and a spike in fuel prices were also dampening car sales.

"Even though car prices have come down following the auto policy announcement, it has been offset by rising interest rates," he told AFP, adding that many consumers were hesitant to make major purchases.

"Some are buying motorcycles rather than cars to reduce their fuel costs," he added.

Depending on new models

An auto analyst with a local brokerage said consumers were also waiting for car manufacturers to release new models.

"New models for 2006 will be coming out from April," she said.

Despite the decline in car sales in the first three months, the industry could expect better fortunes towards the end of the year, she added.

"We expect sales to pick up gradually," she said.

In January, the Malaysian Automotive Association (MAA) predicted motor vehicle sales to grow by three percent over 2006 to 565,000 units. About 60 percent of vehicle sales in Malaysia consist of passenger models.

The new auto policy comprises a string of measures to boost the sector including tax cuts of 5-15 percent on imports from the 10-member Association of Southeast Asian Nations.

The policy is aimed at helping Malaysia achieve its goal of becoming a regional auto hub and making its lumbering national auto industry more competitive.

From a market share of 60 percent in 2002, the national Proton car has seen a steady decline in sales to 48 percent in 2003, 44 percent in 2004 and then 41 percent in 2005.