Household Automobile Purchase Decision: An Application of Discrete Choice Model in Selected Areas in Malaysia

Globalization, particularly the formation of AFTA (ASEAN Free Trade Area), is expected to present greater challenges to the Malaysian automobile industry in terms of competition with neighboring countries especially Thailand. Hence, understanding consumer needs and making an adequate provision for them are crucial for local producers to survive in the globalized market economy. This research investigates how consumer’s choice among three broad makes of passenger automobiles in Malaysia (Proton, Perodua, and foreign) is affected by consumer characteristics and car model prices. The data for this study are obtained from a survey on a sample of 804 households in Malaysia, and are analyzed using discrete choice models. From the analysis of the impact of household characteristics on automobile choice, it is found that a) Perodua and foreign automobiles appear to cater to small families while Proton cars to big families, b) Proton and Perodua cars appear to cater to relatively low-income people while foreign automobiles to high-income people, and c) Perodua cars appear to cater to older people while Proton or foreign cars do not appear to cater to a particular age group. Thus, local automobile producers should concentrate on the market for older persons, persons with large family and affordability. From the analysis of the impact of car model prices on automobile choice, it is found that a) each model within a given make is a substitute to other models in other makes, and b) the closest substitute to Proton is the Myvi 1300cc and Saga 1300cc is the closest substitute to Perodua. Therefore, local auto makers need to differentiate their products further to lessen competition between them. All of these results provide useful information to Proton and Perodua so that they might avoid competing with each other but they may be able to compete more successfully with foreign producers.