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auto industry

‘Perodua Smart Build’ is officially launched today as the Malaysian carmaker’s first sustainable blueprint. It encompasses nearly the entire Malaysian automotive supplier and dealer ecosystem, with the aim of moving the industry towards greater globalisation in the future.

Explaining the blueprint, Perodua President & CEO, Dato’ Zainal Abidin, said, “Perodua Smart Build is an evolution of what Perodua and the Malaysian automotive industry were originally set up to do: to create a sustainable and robust automotive ecosystem.”

He said that Perodua Smart Build is also Perodua’s ‘Transformation 3.0’. It builds upon its previous milestones which began with the first transformation phase in 2011. At that time, the company worked towards building the Energy-Efficient Vehicle (EEV) ecosystem, stop defect outflow, set up Perodua Global Manufacturing Sdn Bhd, and change Perodua’s mindset to be quality conscious.

Perodua

Transformation 2.0, which followed, was focussed on customer satisfaction, organisational development and the fostering of unity within the entire Perodua Group of Companies.

“Now, we are at the third phase of transformation to ‘build’ a sustainable future for both Perodua and its partners to a point where we will be able to find our own niche in the automotive industry,” Dato’ Zainal said.

He said that under ‘Transformation 3.0’, Perodua is working together with its business partners to rationalise the gap in quality, cost and delivery within the automotive ecosystem and get the industry to be in ‘the right size’.

Dato’ Zainal also said that Perodua is also working with all its partners to see where existing expertise can be utilised beyond Malaysia. He gave the example of how Perodua staff are now working to design Daihatsu models in Japan as part of Perodua’s effort to export local expertise abroad.

Malaysian designers from Perodua are working with Daihatsu on the designs of future models.

Dato’ Zainal said Perodua will continue to leverage on its close partnership with Daihatsu to realise Perodua Smart Build’s objective. “Perodua Smart Build will be accomplished with the help of our shareholder, technology and technical partner Daihatsu Motor Company of Japan; and the Malaysian government who had the foresight to create this ecosystem for the benefit of the country,” he said.

According to Dato’ Zainal, Perodua Smart Build is designed to help Perodua and the automotive ecosystem reap the benefits of the National Automotive Policy by making the industry more competitive and progressive.

Chief among the components of Perodua Smart Build are full product development by Perodua and its suppliers, the establishment of a first-class working culture and first-class thinking that will be able to contribute to the nation.

“Perodua Smart Build’s launch does not mean that we have reached the full potential of these components; rather, it marks the start of Perodua and its partners’ journey towards a higher level of competitiveness. We are grateful to Daihatsu for this opportunity and for their continuous support of Perodua since the very beginning. It is now time for us to fully extend this cooperation to our Malaysian business partners,” Dato’ Zainal said.

Perodua has been committed to supporting Malaysian suppliers and keeps increasing the value of local sourcing each year.

He added that a number of Malaysian suppliers are already part of Daihatsu’s global supply chain, and Perodua is working with the Ministry of International Trade and Industry to prepare more local suppliers to follow suit. “We are also focusing more on developing our dealers, including strengthening their operations and guiding them towards the adoption of global best practices to further improve customer satisfaction,” he added.

He explained that Perodua’s goal is to ensure its dealers’ business sustainability by providing guidance of best practices and the latest technology for growth. “We consider our dealers business partners in the same way Daihatsu is our business partner, and we are committed towards their prosperity as long as they, too, are committed to our goals.”

“Where products are concerned, our future offerings will better reflect contemporary trends without compromising our fundamentals – space, practicality, quality, dependability, fuel efficiency and unparalleled value,” said Dato’ Zainal.

Perodua aims for 9% increase in sales volume to 240,000 units in 2021

Sales of new vehicles will not require payment of Sales Tax this year. For models that are assembled locally (CKD), the exemption will be 100% while for imported (CBU) models, the exemption will be 50%.

These are incentives which the Prime Minister today announced as part of the Short-Term Economic Recovery Plan. The plan has 40 iniatives totalling RM35 billion and the tax exemptions for the auto industry are for the period from June 15 until December 31, 2020.

Sales tax is set at 10% so purchasers of locally-assembled models will not have to pay that entire amount, while those who buy CBU models will have to pay half of the sales tax that would be payable. The revisions should be quite straightforward although the car companies will now have to accept that people will hold back their purchases for another 10 days.

Among the first in the industry to comment on the development, UMW Toyota Motor’s President, Ravindran K. said: “This is indeed good news for the auto industry and we are grateful to the government for assisting this sector. The full savings will be passed on to customers and we expect that the reduced prices will help to revitalize the automotive industry.”

Mr. Ravindran said that the company already has new models planned for launch this year. “With the tax exemptions, we will be making the relevant adjustments to the retail prices of all our models and apply them by June 15,” he added.

“The Malaysian auto industry, like those in other countries, has been greatly affected by the long period of inactivity during the Movement Control Order period. Apart from lost sales and production, there is also consumer sentiment which is uncertain of the future. Therefore, we appreciate the support from the government to help boost the industry,” said Akio Takeyama,
Deputy Chairman of UMW Toyota Motor.

The effects of the COVID-19 pandemic have been very hard on virtually every industrial sector, not just in Malaysia but also in other countries. As the situation eases, governments are now looking at ways to help industries recover as quickly as possible so the economy can be revitalized.

The auto sector in Malaysia is no exception and the shutdown will have implications on the Total Industry Volume in 2020. The Malaysian Automotive Association (MAA) has given a forecast of 400,000 units.

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By now, Malaysians would know that the Movement Control Order (MCO) will not expire on April 14 but continue till April 28, 2020. The reason is to give more time for the effects of social distancing and restricted movements to slow down the spread of the COVID-19 coronavirus and ‘flatten the curve’. The latter refers to a graph which projects the number of infected cases and the ‘flatten to curve’ will keep the number lower so that our medical facilities can cope.

In Europe and America, the number of cases has gotten so high that hospitals cannot cope and lives are being lost because of insufficient life-saving equipment and even beds. We do not want that to happen in Malaysia and it seems that the MCO has worked to some extent although the Health Ministry’s Director-General says that more time is needed.

Understanding that the restrictions, which have included closure of most businesses, has seriously affected the economy and put increasing pressure on workers, the government will permit certain sectors to operate in what we hope is the final phase of the MCO. The sectors involve industries such as machinery and equipment, social health services, construction, aerospace, optical shops, laundry shops and barber shops. Earlier, hardware shops had already been allowed to operate on certain days and within certain hours.

Proton

Some sectors of the auto industry are also allowed to operate in the coming weeks. These are plants and companies which are involved in the assembly of vehicles for exports (production for the domestic market is not allowed). This would mean brands such as BMW, Mazda, Perodua, Peugeot, Proton and Volvo, along with the companies which provide parts to them.

It’s good news but might not be as helpful to the companies as it seems. There are still parts and systems that are imported from not just other ASEAN countries but also Japan and Europe and with many production facilities shut down, it may not be possible to finish assembly of the vehicles. Just one part not being available means the vehicle cannot be completed although there might be a small stock of the parts.

Assembly

However, most automobile factories today operate on a just-in-time system where a minimum stock is kept to reduce storage space requirements. Under normal circumstances, the supply chain from overseas is constant and that’s fine. Now with many sources shut down and also local restricted movements for which exemption will be needed to get the parts out from the ports, it will be a challenge for the assemblers.

Then there’s the matter of whether importers in other countries want new vehicles. Vehicles from Malaysia are exported mainly to ASEAN countries as the ASEAN Free Trade Area (AFTA) agreement allows them to be imported duty-free. But Thailand, Indonesia, Brunei and the Philippines are all under similar crisis conditions and sales would be down.

Service centres allowed to open
When the MCO was first activated, all service centres had to close. The only allowance was for emergency services to tow disabled vehicles or change batteries, but no work was to be done at the premises. If a car was towed there, it would remain there until the MCO was over before any repair work could start.

Service centre

Now, it has been announced that ‘aftersales activities’ will be allowed to resume from next week (provided approval is given to the company by MITI). This is taken to mean that the service centres can operate and receive cars for servicing. So far, it is not known if the companies will open their service centres and we’ll only know after Monday when applications are submitted.

The manager at a company selling a leading brand said that there is also concern about their own people getting infected and whether it is worth the risk for now. Furthermore, with the 10-km range imposed under the MCO, there may be vehicle owners who may be beyond range to reach the authorized service centres.

The personnel at roadblocks have been instructed to be stricter and many people have been charged with disobeying the regulations, which means a RM1,000 fine or 6 months in jail (higher penalties might be considered).

Roadblock

Basically, for private motorists, besides the 10-km range from your home that you can travel to buy essential items or for emergencies, only one person can be inside the vehicle. You may be required to show proof of residence which, if not the same as what is on your MyKad, can be shown with TNB or water bill for your current place of residence. You are not allowed to wander around after making your purchases and should return straight home.

As everyone from the Prime Minister to the medical personnel at hospitals has appealed: STAY AT HOME. This is how you can do your part in the War on COVID-19. It may be frustrating and for many, a worrying time as it creates uncertainties about the future but we need to make the sacrifices so our lives can return to some normalcy (although things will be different for sure).

Social distancing

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BHPetrol

Local assembly of vehicles has been going on since the mid-1960s when the government offered incentives to carmakers to build factories and assemble their vehicles in Malaysia, or have the vehicles assembled under contract by other parties. The move was to put Malaysia on the path towards industrialisation and the auto industry was to serve as a catalyst, as it had in countries like Japan and Germany.

From a handful of factories in the late 1960s, mainly in Selangor and Johor, the network of assembly plants spread across the country to states like Pahang and Perak, and even East Malaysia. The number of factories has risen and fallen as market conditions have changed over the past 50 years, and there are 22 active plants today which collectively produced  380,940 units of passenger and commercial vehicles during the first 8 months of this year.

From the start, the government encouraged the sourcing of parts locally as well to develop the auto industry in a comprehensive way. Incentives were also given for using more local parts as well as for investments made to grow local assembly. However, where exports are concerned, Malaysia has not been as strong as Thailand and Indonesia and it is only in the past decade that a few carmakers have started to use Malaysian plants as regional production hubs for some models.

Mazda Kulim Plant

Assembly plants in Malaysia

HICOM
Aerial view of HICOM Automotive Manufacturers (Malaysia) in Pekan, Pahang. Brands such as Isuzu, Volkswagen, Mercedes-Benz, Mitsubishi FUSO and DEFTECH assemble their products at the complex.

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