KUALA LUMPUR - AUTOMOBILE production in Malaysia is expected to sink by 12.7 per cent this year, driven down by lower consumer confidence and tighter credit, the trade minister warned on Tuesday.

Muhyiddin Yassin told state media that vehicle production is expected to drop to 480,000 units this year from 550,000 in 2008.

'The current global financial crisis and economic slowdown are impacting the automotive industry worldwide and the car companies globally are experiencing severe difficulties,' he told the official news agency Bernama.

Mr Muhyiddin's remarks come after the country's vehicle sales fell 4.8 per cent year-on-year in February, following a 17.5 per cent drop in January as consumer confidence nosedived.

The Malaysian Automotive Association has also made a similar prediction, saying vehicle sales would fall 12.4 per cent in 2009 due to a slowing economy and poor consumer sentiment amid the global economic slump.

Mr Muhyiddin said that demand for vehicles has been hurt as banks have adopted tough loan approval standards.

The government has allocated an additional 200 million ringgit (S$83.3 million) to the automotive development fund to spur the industry, he said.

The minister said the fund is part of the 16.2 billion dollar economic stimulus package announced on March 10.

The government has said the economy could contract by 1.0 per cent in 2009. -- AFP