(Recasts, adds detail, background)
By Liau Y-Sing
KUALA LUMPUR, Jan 27 (Reuters) - Malaysian new vehicle sales fell 6.9 percent year-on-year to 405,010 units in 2003, confirming Thailand's emergence as Southeast Asia's largest car market.
Sluggish Malaysian sales, after record numbers in 2002, came as buyers stalled for lower prices with Malaysia's adherence to the region's free trade agreement.
The Malaysian Automotive Association (MAA) said in a statement that with the government's position on car taxes now clear, it expects sales to grow 5.0 percent this year.
"Auto industry sales can expect to perform better in 2004. The direction by the government is clear and vehicle prices are not expected to come down with the implementation (of) AFTA in Malaysia," it said.
MAA gave a breakdown for passenger car sales for 2003 of 319,847 units versus 359,934 units the year before.
Malaysian drivers who held back purchases were disappointed at the end of last year when the government cut import tariffs while raising excise duties to 60-100 percent, leaving prices much the same or even slightly higher.
The change brought Malaysia in line with the letter of the Association of South East Asian Nations Free Trade Area (AFTA), whose lead countries have cut auto tariffs to between zero and five percent to boost regional trade.
Malaysia's delayed decision on tax policy, intended to protect national carmakers such as Perusahaan Otomobil Nasional Bhd (Proton) , allowed Thailand to grab a larger chunk of car manufacturing capacity.
Thai domestic car and truck sales rocketed 30.2 percent year-on-year to to 533,176 units in 2003, according to data released this month by Toyota Motor Corp's Thai unit.
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
Commercial vehicle sales were 50,824 units versus 42,727 in 2002, the MAA added.
MAA said sales of vehicles by national carmaker Proton totalled 155,420 units in 2003, down sharply from 214,373 in 2002.
Proton shares were unchanged at 9.05 ringgit ($2.38) by 0240 GMT.
($1 = 3.8 ringgit)