This article first appeared in The Edge Financial Daily, on March 18, 2016.

KUALA LUMPUR: Price hikes and weak consumption sentiment seem to have driven down Malaysia’s auto sales, which have contracted for two consecutive months.

Vehicle sales in February shrank by almost a quarter to 37,876 units — the lowest recorded since August 2013 — from 50,390 units in the same month last year, according to the Malaysian Automotive Association (MAA) data. On a sequential basis, total industry volume (TIV) in February was 15.1% lower against 44,591 units sold in January.

Passenger car sales dropped 24.1% to 34,126 units in February from 44,961 units in the previous corresponding month last year, while commercial vehicle sales retreated 31% to 3,750 units from 5,429 units in February 2015.

In a statement yesterday, MAA attributed the lower sales in February to cautious consumer spending on big-ticket items amid the economic slowdown and rising costs of living.

Nonetheless, MAA expects sales volume to be higher in March compared with February. “This is due to a longer working month and continuation of promotional campaigns by car companies,” it added.

An MIDF Research analyst commented that the demand is soft partly because many Malaysians rushed to grab a car to take advantage of the sharp discount offered in December, coupled with expectations of a price hike this year. He expects auto sales to be flat after the new record high set last year, noting that there could be downside risks.

MAA said total vehicles produced in February were 25.2% lower at 35,130 units from 46,958 units in the same month last year.

Passenger vehicle production in February declined 24% to 33,480 units compared with 44,023 units in February 2015, while commercial vehicle production fell 43.8% to 1,650 units from 2,935 units in the same month in 2015.

Year to date (YTD), the TIV slid 18.3% to 82,467 units from 100,992 units in the same period last year.

For passenger cars, the MAA said the sales in the first two months of 2016 dropped 17.3% to 74,126 units from 89,658 units a year ago, while commercial vehicle sales slipped 26.4% to 8,341 units from 11,334 units.

YTD production came in 21.1% lower at 81,781 units compared with 103,612 units a year earlier.

For passenger cars, the MAA said production was down 21% to 76,178 units from 96,410 units a year ago, while commercial vehicle production fell 22.2% to 5,603 units from 7,202 units.