equipment industry, consisting of the manufacture and
assembly of motor vehicles and component parts, was severely
affected by the contraction in domestic demand since the
last quarter of 1997. Output of the industry declined,
sharply by 51.0% during the first seven months of 1998
(January-July 1997: +12.9%). The most affected sector was
the manufacture and assembly of motor vehicles which
declined by 60.1%, followed by the manufacture of
motorcycles and scooters, (-41.1%%) and manufacture of motor
vehicle parts and accessories, (-36.8%) against increases of
12.2%, 22.6%, and 8.8% recorded respectively during the
corresponding period of 1997.
In terms of the
number of units produced, output of commercial vehicles
recorded the sharpest decline of 86.0% to 7,605 units during
the first seven months of 1998 (January-July 1997: +47.2%).
Output of passenger cars fell by 60.0% to 76,767 units
(January-July 1997: +10.1%). The national car producers were
also severely affected by the downturn in the industry.
During the first seven months of 1998, output of PROTON cars
contracted by 59.9% (January-July 1997: +34.1%) while
production of PERODUA vehicles declined by 17.1%
(January-July 1997: +53.8%). The motorcycle sector was also
affected, with output decreasing by 38.3% to 156.353 units
during the same period (January-July 1997: +36.5%). In
consonance with the lower production of motor vehicles,
output of automotive components and accessories has also
decreased. For the first seven months of 1998, the value of
automotive components produced was RM1.1 billion,
significantly lower when compared with RM1.9 billion for the
same period in 1997.
The erosion of
financial wealth of consumers due to falling asset prices,
stringent hire-purchase guidelines for passengers cars
during the first seven months of 1998 and higher import
duties on certain categories of vehicles were some of major
factors that adversely affected demand and, therefore,
production of the transport equipment industry. Sales of
passenger cars as measured by new vehicle registration
slumped by 62.5% to 63,772 units during the first seven
months of 1998 (January-July 1997: +21.5%), while sales of
motor cycles fell by 41.2% to 139,496 units (January-July
1997: +25.2%). Sales of commercial vehicles declined by
81.3% to 8,384 units (January-July 1997: +40.3%).
of domestic demand poses several problems to the industry.
Boosted by strong demand of the last few years, the
transport equipment industry expanded its production
capacity rapidly to 600,000 units of passengers and
commercial vehicles and 7000,000 units of motorcycles per
year. With the sales orders down, the industry is now
burdened with substantial excess capacity. On account of
large stock overhang the unfavorable market prospects, nay
of the companies involved have reduced number of shifts or
work days while some have opted for staggered production or
temporary shut down. The average capacity utilization was
reduced to the level of about 30% as compared with about 75%
in 1997. As a result, the industry encountered problems of
high inventory, tight cash flow, under utilization of
capacity, redundant facilities and excess work force.
However, with the recent easing of the credit guidelines on
hire purchase of cars and the reduction in interest rates,
the industry has seen some recovery in sales lately. For
instance, in August 1998, sales of passengers cars rose to
13,658 units, as compared with 12,167 units in July and
5,641 units in February 1998.