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Total sales volume in the automotive industry is expected to increase seven percent to 521,200 units this year from an estimated 487,000 units in 2007, driven by sales of replacement cars, consultancy firm Frost & Sullivan said Thursday.

A substantial number of Malaysia who bought their vehicles from 2001 to 2003 will be looking at replacing their cars in 2008, said its head of automotive and transportation practice, Asia Pacific, Kavan Mukhtyar.

He said consumers were more likely to replace their cars near the end of their car loan period if their outstanding loans could be covered by the trade-in value of their vehicles.

"Besides that, stabilised used car prices in the market will also attract replacement car buyers back to the market," he told reporters at a media briefing here on the country’s automotive outlook this year.

Kavan said vehicles sales are also expected to continue its growth phase from June 2007 into the first half of 2008 due to the car sales momentum carryover from 2007 of models such as the Perodua Viva and Proton Persona as well as upcoming new models from other automakers.

Among the new models to be launched are Proton’s new Base Line Model (BLM), the Nissan Sentra, Honda Accord, Perodua Kembara, Toyota Altis and the Perodua Myvi facelift, he said.

According to Kavan, passenger cars will remain the fastest growth segment, accounting for close to 80 percent of the total market, with the growth of the segment expected to increase eight percent year-on-year in 2008.

Other factors contributing to growth will be the favourable economic environment, rising employment opportunities, increased government spending from the Ninth Malaysian Plan and growth corridors, boosting disposable incomes across the nation, he said.

Despite concerns that vehicle sales this year could be affected by stringent financing by banks and the higher cost of vehicle ownership with expected petrol and toll rate hike, Kavan said this could result in a shift towards fuel-efficient and lower maintenance vehicles.