Vroom missing in car push
Malaysia’s auto sector has shrunk instead of expanded over the years because its auto roadmap was too difficult to read. Auto executives described it as opaque, uncertain, and lacking in details, and found it difficult to make a case for expansion.
Singapore Business Times
When Malaysia unveiled its National Automotive Policy (NAP) more than three years ago, the aim was to make the country a regional auto hub with the designation of various areas as production centres throughout the country.
Certain places in Kedah, Penang, Pahang, Perak and Selangor were to act as clusters for auto and auto-related firms — incentives and assistance programmes enabling ‘just-in-time’ manufacturing.
Little of this has been translated on the ground, however, and unfortunately, many people equate NAP with slumber.
Malaysia’s auto sector has shrunk instead of expanded over the years because its auto roadmap was too difficult to read. Auto executives described it as opaque, uncertain, and lacking in details, and found it difficult to make a case for expansion.
Even local players are finding it tough. The country’s main national car company Proton is only using half its capacity and has talked about rationalising its operations and using only one plant. Instead of putting in new investments, under-used facilities are now the subject of interest to foreign players such as Volkswagen or General Motors.
Despite Malaysia’s headstart, Thailand continues to pull ahead because of its more open auto policies. Indonesia is also beginning to attract more investments in the sector.
Because these countries do not have a national car, their auto policies are less conflicted, a point that Malaysia’s International Trade & Industry Minister Mustapa Mohamed alluded to last month when he said that Malaysia’s current review of its auto policies was complicated, with many issues to be considered and hence could not be rushed.
In Malaysia, these issues invariably involve quotas and approved permits (APs) to bring in completely built-up vehicles, as well as ways to assist the national cars. For example, although APs are scheduled to be phased out by the end of next year, one can expect AP holders — perceived to be mainly the politically connected — to fight to retain the rights to such a lucrative source of income.
Because the NAP was politically, instead of economically, driven, it was bound to stall. Despite grants and incentives to auto companies to deepen their investments, none saw any benefit in doing so. Even local players such as Proton, which qualified the most for these grants because of its greater use of local content and the like, continue to flounder. And given the way much bigger auto firms have been merged or gone the way of the dodo, few expect Proton in its present form to survive globalisation.
Politics was also the reason a planned equity partnership between VW and Proton was aborted in 2007 after Malaysia’s leaders unwisely concluded that the latter’s performance was improving and that it did not need to be hitched to a bigger name.
In any event, Kuala Lumpur’s dithering only benefits its competitors, the biggest being Thailand, which has convinced major car companies that it is an good Asean base.
The largest passenger car market with some half a million sold annually, Malaysia is not without attraction to car companies. But unless Kuala Lumpur is clear about where it sees its niche in the auto sector and spell out more clearly where auto investors can fit in over the next 5-10 years, interest will continue to dwindle.
It is worth noting that Thailand has managed to keep the auto players in the country, political unrest notwithstanding, In recent years, it has succeeded in pulling even more players into its green or eco vehicle project, including VW, which according to reports plans to invest nearly US$1 billion in a new plant. Observed green autoblog: “Thailand’s eco-car programme is so popular, it might be easier for us to report to you who has not joined”.
Last week, VW’s Malaysian head said that the company was considering Malaysia as a sourcing hub for auto components for its global production given the many high-tech companies based here which have managed to fulfil the needs of international suppliers.
Granted, such investments are smaller. But if Malaysia is not ready to compete at the top tier, it ought to make the most of secondary opportunities and to tailor its policies so that competitive auto part and component players are encouraged to shine and grow their business internationally.
