27 June 2017
Kuala Lumpur – Malaysia’s car industry is set for a smoother drive with both national carmakers, Proton Holdings Bhd and Perusahaan Otomobil Kedua Sdn Bhd (Perodua), shifting to top gear to become more robust and competitive.
Proton’s alliance with China’s Zhejiang Geely Holding Group Co Ltd should be able to address the structural issues faced for so long – small market, lack of economies of scale and costly research and development (R&D).
Perodua, on the converse, is moving up the value chain in the industry based on its its ability to compete globally.
Bernama delved deeper into the progress made by the carmakers in a recent interview with Minister of International Trade and Industry, Datuk Seri Mustapa Mohamed.
Proton, the country’s first carmaker, was now able to access existing markets of the Chinese carmaker as well as the right-hand drive segment in South-East Asia, Mustapa said.
“The partnership will allow Proton to tap into Geely’s technology and R&D facilities including a range of platforms and power trains. More importantly, it could fully realise the potentials of its production plants,” he said.
Mustapa said Proton could turn around and be a competitive global player with all of these issues addressed.
Geely signed a definitive agreement on June 24 to take a 49.9 per cent equity in Proton Holdings worth RM460.30 million. The Chinese car group also acquired a 51 per cent stake in British carmaker, Lotus, which Proton has owned since 1996.
“The car industry was positive in reacting to the announcement by DRB-Hicom to sell 49.9 per cent of its equity to Geely on May 24, 2017.
“Many understand the need for Proton to have a strategic partner to overcome its main challenges including a decline in domestic sales, limited export market, lack of economies of scale and investments in R&D and technology,” said Mustapa.
However, there are concerns from local car industry on the impact of the strategic partnership to local vendors, especially once the business restructuring of the partnership takes place.
Proton has about 240 vendors, with almost 50,000 employees in its direct supply chain.
“Nevertheless, DRB-Hicom has given an assurance that in selecting Geely as its partner, it has taken into account all such issues, including the impact on local vendors.
“While local vendors are still expected to meet stringent quality, cost and delivery measures to ensure the competitiveness of Proton, they are also open to other opportunities created from the partnership.
“These include technical cooperation to enhance capabilities, possible participation in Geely’s supply chain and being able to export regionally,” Mustapa explained.
On whether the local car industry was considered to be liberalised with the Proton-Geely tie-up, he said, the industry was already fairly open and liberalised under the National Automotive Policy 2014.
“The government has allowed for issuance of new Manufacturing Licence for motor vehicles in the category of energy-efficient vehicles across all segments without engine capacity restriction.
“In addition, there is no equity limit for foreign investors/companies to participate in manufacturing activities in the car sector.
“Thus, there is no issue of liberalisation of the car industry to be linked with the tie-up,” he added.
As for Perodua, he said, the second national carmaker was currently doing very well with domestic sales of 207,110 units last year with 35 per cent share of the overall total industry volume, putting Perodua as market leader in the local motor vehicle industry.
Perodua was also developing an export plan to widen its market in ASEAN, Organisation of Islamic Cooperation countries and Africa, he said.
“Perodua already exports close to 5,000 units yearly to Sri Lanka, Indonesia, Fiji, Brunei and Mauritius.
“Also, it is working to get our local vendors to participate in the supply chain of Daihatsu,\” Mustapa said.
Traditionally, Perodua’s strength is in the small compact car market because of its alliance with Daihatsu, renowned for producing compact cars.
Mustapa said the introduction of the Bezza model last year and its positive reception, demonstrated the Perodua’s capability in venturing to other segments, he said.
Bezza was the first Perodua model to be designed and developed in-house.
In addition, Perodua has more than 100 local vendors to participate in the manufacturing of parts and components to meet its needs.
“These initiatives are a testament to Perodua’s commitment to move up the value chain and its ability to be globally competitive.
“Perodua’s business model to tie-up with Daihatsu has proven to be successful and it must continue to undertake aggressive exports promotions to market its cars abroad,” Mustapa said. – Bernama