| |
Malaysia's auto sector faces roadblocks
By Arun Bhattacharjee
KUALA
LUMPUR - When more than 40 car makers reach zero hour on
January 1, 2005, when they will enter an open market in
Malaysia, the country's traffic-choked capital is likely
to be in gridlock, as a million vehicles will have been
added by that time.
Sales of domestic
automobiles including commercial vehicles (CVs) in 2002
recorded an average 3.5 percent growth while the sales
of foreign cars and CVs, posting a 2 percent increase in
market share, recorded a 29 percent increase in sales.
This was made possible by strong push by South Korean
car makers, especially the Kia Group.
Given the
Malaysian preference for foreign cars and the hope of a
better economy two years from now, Kuala Lumpur may
become a motorist's nightmare. In spite of all its
flyovers and bypasses, the traffic congestion, already
bad, may look no different from that of Lagos or Cairo.
In June this year Malaysia will welcome its 25 millionth
child and the 2.9 millionth motor vehicle, making every
1.72 Malaysian family heads car owners.
The fear
of gridlock is further compounded by the government's
decision not to spend US$3.2 billion on highway
infrastructure because of the continued economic
downturn.
There are 20 months to go before the
protected automobile market in Malaysia is opened to
competition from other Association of Southeast Asian
Nations (ASEAN) states. Foreign car makers in Malaysia
fear, however, that an unfriendly tax structure may take
away the benefits of liberalization. At the same time
Malaysia's automobile industry is not yet ready for the
challenge, says a spokesman for the Malaysia Automotive
Association (MAA). Although the industry would be happy
to have protection for another two years beyond 2005,
the government is unwilling to beg a further extension
from ASEAN.
International Trade and Industry
Minister Rafidah Aziz last week told the Perusahaan
Otomobil Kedua (Perodua), Malaysia's No 2 car maker,
that the industry was allowed 12 years to improve
quality, design and cut costs to become competitive. The
minister's response indicates a partial hardening in the
government's attitude toward the industry. An industry
source revealed that the automobile industry, which had
been expecting a large subsidy from the government to
absorb the first shock, was not sure of that anymore
because of the continued economic crisis. According to
an industry source, Malaysia's automobile industry, so
long protected by an unbreachable tariff wall, may still
require of total of between $778 million and $1.5
billion in subsidies to remain competitive.
Meanwhile, 814 companies dealing in automobiles,
parts and accessories are waiting for the government to
spell out the tax structures on vehicles not of ASEAN
origin. They represent a very broad cross-section from
economy cars to luxury vehicles. From 2005 automobiles
from the ASEAN countries cannot be taxed more than 5
percent according to agreement reached by the regional
governments for a free-trade area (AFTA). Unless Kuala
Lumpur spells out the different tax structures,
producers from Europe, the United States, Japan and
South Korea will be disadvantaged. Representatives of
Ford, Nissan, Toyota and Volkswagen say they need enough
time to work out their strategies for this new market in
spite of their continued presence here.
Malaysia's Second Industrial Master Plan (IMP2),
1996-2005, includes the automobile industry as a vital
sector. The government told the auto industry to adopt
global orientation, enhance capacity, improve economic
foundation, enhance brand-name recognition, and improve
human resources and management.
Seven years from
the launch of the IMP2 the national automobile industry
is far from competent in size, management, technology
and human resources. This has allowed international
manufacturers to increase their sales as a percentage of
market share. For instance, the sales of local brands
registered an average 5.5 percent decline in March
against a 15 percent increase in the sales of
Malaysia-assembled or imported passenger cars, and a 10
percent increase in the CV segment, according to figures
released by the government. These figures are in
variance with those released by the MAA.
A
report by the MAA says "the continued softening of
demand for the nationally produced cars saw the sales in
that segment declining by 9.27 percent in March 2003
compared [with] the same month in 2002. Sales of
national commercial vehicles also declined to 1,341 from
1,612 during the same period a year ago. Whereas, sales
of non-national vehicles increased by 11.69 percent
compared with the same period" a year previously.
This is indicative of the strength of the
foreign brands in Malaysia. The Greenfield Kia group
from South Korea has already invested nearly $100
million to increase capacity and Honda Motor, which owns
51 percent of Honda Malaysia, is investing nearly $100
million in the next 18 months to shore up capacity.
Malaysia is not a big market, with about
45,000-48,000 units sold per month, including passenger
cars and CVs. According to a spokesman from MAA,
Malaysia is in a better position with its infrastructure
to compete in other markets such as Indonesia and
Thailand. Yet it appears that the local producers are
likely to miss the bus because of their size and their
failure to develop energy-saving local brands at a lower
cost. Only Proton, the No 1 producer of local cars and
commercial vehicles, has announced the development of a
locally made engine but it is unknown how long it will
take the group to meet the development costs without
government subsidy. The other producer, Perodua, claimed
recently that it was able to reduce costs and in a
position to reduce the price of its Kancil by $100.
The foreign car makers in Malaysia are worried
because of the delay in announcing the tax structure for
assembled or imported vehicles. The announcement was to
have been made in February this year. "The lack of
information is not helping car manufacturers, assemblers
as well as franchise holders and their principals to
make proper plans, especially those related to new
products or local assembly programs," says an executive
of Tractors Malaysia, which holds the franchise for BMW.
One foreign-maker executive said, "We know that
the taxes on ASEAN-made cars will be no more than 5
percent, but we have to know what kind of taxes we may
have to pay. The tax structure should not be punitive to
make us less competitive in the region."
(©2003
Asia Times Online Co, Ltd. All rights reserved. Please
contact content@atimes.com
for information on our sales and syndication policies.)
|
| |
|
|
 |
|
