Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad attributed the weaker sales to the moderating economy, lower consumer spending and cautious business sentiment.
Vehicle sales hit a record-breaking 666,674 units in 2015.
Going into 2017, the MAA is projecting total industry volume (TIV) to hit 590,000 units.
"Introduction of new models with the latest additional specifications, design styles and at a very competitive prices can assist to sustain buying interest," Aishah said at a briefing on Malaysia's 2016 auto sales review.
At 580,124 units, sales last year narrowly met the MAA's target of 580,000 units for 2016.
The last time TIV fell short of the 600,000-mark was in 2009 at 536,905 units. In 2010, sales hit 605,156 units.