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BUSINESS research and consulting firm Frost & Sullivan expects Malaysia's automotive industry to reach an all-time high this year, selling up to 623,000 units of vehicles.

The growth will be spurred by new model launches, stable economic outlook, greater employment stability and marginal impact of the expected interest rate hike.

In 2010, the domestic total industry volume is likely to hit 598,200 units, a growth of 11.4 per cent over 2009, Kavan Mukhtyar, Frost & Sullivan partner and head of the automotive and transport practice for Asia Pacific, said.

The Malaysian Automotive Industry is set to announce the sales data for 2010 in the middle of this month.

"The record vehicle sales in 2010 were mainly attributed to the improved economic sentiment and spillover sales from new models launched in 2009," Mukhtyar said at a media briefing on Frost & Sullivan's Malaysian annual automotive industry outlook in Kuala Lumpur yesterday.

Perodua will continue to hold a leading position, commanding an expected 34.6 per cent market share last year due to robust sales of Alza and Myvi models, while Proton will have an estimated 29.3 per cent market share.

Rising oil prices in 2011 could present a renewed challenge but Mukhtyar is optimistic that the impact will be minimal as rises in the country are marginal, and it would not hurt the industry that much.

"As long as the increase in fuel prices is reasonable, there will be no dramatic impact on vehicle sales. This is more so in a country where public transportation service still has some gaps. Consumers do not really have an option, as they need vehicles as their means of transport," he said.

While hybrid car sales in Malaysia are likely to take off in 2012 and beyond, sales this year will likely be more than double to 3,400 units as compared to an estimated 1,500 units sold in 2010.

This is due to the excise duty exemptions on hybrid cars below 2,000cc until the end of 2011.

"This depends on the government's commitment to ensure the development of hybrid vehicles. Incentives given by government are likely to generate high interest on the likes of Honda Insight and Toyota Prius. Proton is also likely to launch a hybrid model for Exora by end of 2011," Mukhtyar said.

This year, small and compact cars will continue to be the fastest-growing segment, increasing 14 per cent year-on-year to 91,044 units in 2011 due to launch of new Perodua Myvi, which will likely receive good response.