Malaysian new-vehicle sales rose 4.1% to 313,488 units in the year’s first half, despite a market disruption caused by an election campaign promise of lower prices in the future.

Releasing the latest sales data, the Malaysian Automotive Assn. says it is maintaining its forecast of full-year sales at 640,000 units, up from 627,753 in 2012.

The MAA says in a statement vehicle sales fell for the second month in a row in June, down 5.3% to 53,631 units. New-car deliveries declined 5.6% to 47,270 units, while commercial vehicles dropped 2.7% to 6,351.

Despite this, industry analysts Frost & Sullivan raises its 2013 sales forecast 6.4% to 638,000 units, citing positive consumer sentiment, enthusiastic response to key new-model launches and lowered expectations of any significant price reduction resulting from policy initiatives.

The industry outlook is not uniformly optimistic, however.

CIMB Equities Research says it is downgrading the Malaysian auto industry’s rating from overweight to neutral because it believes the market is reaching saturation.

The Star newspaper quotes a CIMB report as saying the June industry figures confirm its full-year outlook. “Our total industry sales forecast of 630,000 in 2013 remains unchanged,” it says. “We remain positive on the…non-national car segment, which has captured 48% market share” in the first half, up from 45% prior-year.

The government’s Bernama news agency quotes MAA as saying its steady 2013 forecast is based mainly on the possibility of further tightening of loan approvals by Bank Negara Malaysia.

MAA President Aishah Ahmad says aggressive sales campaigns and the introduction of new models at competitive prices in the year’s second half should continue to spur buying interest.

“The monthly sales of new vehicles in the first four months of this year were consistently higher than in 2012,” Aishah says. “This expansionary trend was interrupted in May due to the impact of the 13th general election manifesto which promised to reduce car prices, and resulted in consumers holding back their purchases of new vehicles.”

However, she says, deliveries began to improve in June after discussions by various stakeholders and aggressive campaigns by MAA members.

“We believe the second half will be a very challenging period for the industry amid Bank Negara's projection that the economy will continue to record steady growth of between 5% and 6%,” Aishah says.

MAA is not expecting the government to further reduce the excise duty in the upcoming budget, as it accounts for 7 billion ringgit ($2.2 billion) in annual revenue.

First-half passenger-vehicle deliveries rose 3.8% to 275,991 units and commercial vehicles climbed 6% to 37,497.

Malaysian production increased 4.1% to 293,511 units from 282,060 in like-2012. New-car production was up 5.7% to 264,487, while CV output fell 8.9% to 29,024.

At one stage, sales were down dramatically from a year earlier as potential buyers adopted a wait-and-see attitude toward the government’s price-cut pledge. But Malaysia Automotive Institute CEO Madani Sahari helped revive the market, telling a news conference prospective buyers should not wait as price reductions of 20% to 25% will be phased in over the next five years.

“A price of a new car may be lower next year, but then so, too, the value of your trade-in," he says, explaining used-car sales would be hurt if new-car prices were reduced drastically overnight, so this has to be done gradually.

International Trade and Industry Minister Mustapa Mohamed echoes that message, saying car prices will not plunge anytime soon. “The government does not intend to reduce the excise duty at the moment,” he says. “For now, at this time we don’t want to sacrifice MYR7 billion in revenue.”

Mustapa says the government wants market forces and industry players to decide on car prices.

Market leader Perodua tells Bernama its first-half sales rose 4% to 96,873 units, boosted by the launch of the S-Series in March. But President and CEO Aminar Rashid Salleh says deliveries fell 3.7% in June to 15,800 units amid speculation about lower car prices and tougher competition.

“Barring any unforeseen circumstances, we believe we can achieve the earlier (sales) target of 194,000 units by year-end,” Aminar says, adding Perodua produced about 102,000 vehicles in the first six months and aims for 206,700 full-year.

Proton sold 64,782 units in the year’s first six months, ahead of Toyota (43,747), Nissan (26,268) and Honda (21,869). Ford finished in eighth place with 5,228 deliveries.

Kavan Mukhtyar, a Frost & Sullivan partner and head of automotive and transportation practice-Asia-Pacific, says the impact of consumer uncertainty during the run-up to Malaysia’s general election was not as high as expected.

Mukhtyar predicts vehicle deliveries will slow in September as buyers await the government’s annual budget, then speed up in the fourth quarter and the start of the year-end festive season, when auto makers traditionally launch plenty of sales promotions.

Honda Malaysia says it expects to sell 64,000 units this year, up from 34,947 in 2012, despite market uncertainties and expectations of less-expensive cars.

Honda Malaysia Managing Director and CEO Yoichiro Ueno tells the Business Times the government’s promised 30% price reductions will not occur over one year. “It is 3% to 5% a year,” he says.

“At the end, there is nothing to wait for and customers are coming back. We expect car sales to pick up in the second half of this year as the company introduces new (complete-knocked-down) models.”

Ueno says it would be tough for auto makers alone to offer price cuts: “This is a volume-game business, and any lowering of prices will affect the whole network. We are increasing local content so that we can enjoy certain cost reductions and pass this on to customers.”

The Edge Financial Daily reports the MAA predicts steady but not spectacular growth through 2017. The group sees the market rising 2.1% in 2014 to 653,440 units with a 2.2% rise in 2015 to 667,800, a 2.3% rise in 2016 to 683,000 and a 2.4% increase in 2017 to 699,300.