Malaysian new-vehicle sales in January plummeted 17.5% to 37,801 units, from prior-year’s 45,811.

New-car sales fell 18.8% to 34,323 units, from 42,267 in like-2008, while commercial-vehicle deliveries slid 1.9% to 3,478, from year-ago’s 3,544, the Malaysian Automobile Assn. says in a statement.

February sales are not expected to fare much better, as the market continues to be depressed.

The launch of several new models in January, before the Chinese New Year, cushioned the full impact of the soft market, the MAA says. But the holidays also made for a shorter sales month.

Vehicle production fell 19.4% to 37,427 units, compared with 46,467 year-ago.

The MAA predicts new-vehicle sales will tumble 12.4% this year to 480,000 units, from 548,115 in 2008.

In an effort to boost sales, the International Trade and Industry Ministry is proposing a government program that pays owners of vehicles that are at least 15 years old MR5,000 ($1,370) to scrap their cars.

Trade and Industry Minister Muhyiddin Yassin says the proposal had been submitted to the Finance Ministry for consideration under its mini-budget, which would be tabled in Parliament next month.

The Bernama news agency quotes Muhyiddin as saying the move would create demand for new cars and help spur the country’s automotive industry in the wake of the global economic crunch.

The incentives could be in the form of a reduction in excise duties and sales tax or other mechanisms.

Muhyiddin says there are about 1 million vehicles in Malaysia that are at least 15 years old.

Proton Holdings Bhd Managing Director Zainal Tahir says the incentive will spur industry growth.

“This policy is an important tool in the ecosystem of the automotive industry and can help the industry to not only dispose of old cars but also stimulate growth,” he says in a statement.

But former Proton CEO Mahaleel Ariff says the proposed incentive might not help the industry, because potential buyers are finding it difficult to secure bank loans to finance vehicles.

“The problem lies in access to credit,” he tells The Edge Daily newspaper.