As reported earlier, Porsche will be setting up assembly operations in Malaysia, the first time the sportscar maker has produced its cars outside Germany. The company has confirmed that small-scale local assembly operation in Malaysia will join the company’s two other production sites – the original one at Zuffenhausen and the 19-year old one in Leipzig.
It is believed that the plan to assemble in Malaysia has been under consideration for at least 5 years though it was only early this year that it became known outside the company. There is interest in the Southeast Asian region which is unified under the ASEAN Free Trade Area (AFTA) and member nations have agreed to allow intra-ASEAN exchange of goods and service without import duties. The agreement was signed in the early 1990s and was implemented in the early 2000s.
Carmakers have welcomed the AFTA agreement which allows them to set up a large factory with big volumes in one country to make vehicles for the region. This allows good economies of scale compared to the situation before where each country had low-volume assembly plants to cater only for the domestic market. The regional approach lowers production costs which benefits consumers who get lower prices or better features with the money saved.
Porsche would have likewise seen a similar opportunity, especially since Volkswagen began assembly in Malaysia. However, the initial plan is to assemble in Malaysia from 2022 for the local market only but it’s almost certain that there will be exports later on. This will enable pricing of some models to be more attractive and competitive as they will not be subject to the high import duties that the countries impose for vehicles originating from outside ASEAN.
Sime Darby to be local partner
Not surprisingly, Porsche will have Sime Darby Berhad as its partner in local assembly. Sime Darby Auto Performance, a subsidiary of Sime Darby, also handles the Porsche brand in Malaysia and another subsidiary, Inokom, has an assembly plant in Kedah. Some of the brands assembled at the plant, which began operations in the 1990s, are BMW, MINI, Mazda and Hyundai. BMW engine assembly is also carried out by a subsidiary adjacent to the plant.
The Inokom factory in Kedah.Mazda is among the brands that has assembly operations at the Inokom plant.BMW also has engine assembly operations at a facility adjacent to the plant where some of its models are assembled.
First Porsche production facility outside Germany
The local assembly operation will not only be something special for Malaysia but also for Porsche as it has never before had to have a CKD (completely knocked-down) process which is required for assembly overseas. It is not just a matter of picking a model and putting it into a box in disassembled form for assembly in another country. The model has also to be engineered for local assembly, taking into account the level of automation at the facility and capabilities of the workforce.
It is possible that the ‘SKD’ (semi knocked down) approach will be taken initially although this approach was stopped by the government in mid-2019. With SKD, bodyshells can be imported already welded together and in some cases, even painted. One thing that will prevent Porsche from exporting from Malaysia initially will be the requirement of 40% ASEAN content in each vehicle in order to qualify for the duty-free privilege. This usually takes while as suppliers have to be found or if they are new, then they will need time to also establish their operations.
Porsche will have Sime Darby as its partner in the local assembly operations and the two companies are already familiar with each other as Sime Darby Auto Performance, a subsidiary, handles the German sportscar brand in Malaysia.
Willing to learn and adapt
“We’re fortunate that, due to careful planning, our existing factories are more than up to the task of meeting current and future global demand for our cars,” said Albrecht Reimold, Member of the Executive Board for Production and Logistics at Porsche. “However, the new assembly site in Malaysia meets specific market needs and, although a standalone project and modest in size and capacity, it signals our willingness to learn and adapt to specific local market conditions.”
“Malaysia and the whole ASEAN is a region of great potential, and we look forward to the first locally assembled models reaching our Malaysian customers next year,” added Detlev von Platen, Member of the Executive Board for Sales and Marketing at Porsche. “As Porsche is moving into a new era of mobility, Malaysia and the ASEAN region are gaining an increasing importance. This step now is part of a long-standing initiative to keep pace with rapidly evolving customer and market demands.”
UMW Toyota Motor (UMWT) has announced plans to assemble Toyota hybrid models in Malaysia, joining the still-small group of companies that are doing so. The move is driven by Toyota Motor Corporation’s (TMC) global commitment to deliver ‘mobility for all’ and produce ‘happiness for all’ through its commitment towards a ‘Clean, Safe and Secure Society’.
On a larger scale, TMC is aiming for carbon neutrality by 2050 in all its processes. Carbon neutrality means almost zero emissions of carbon dioxide (CO2) which is a ‘greenhouse gas’ that is known to have a significant effect on global warming, causing climate change.
TMC’s reduction of CO2 emissions will encompass the lifecycle of manufacturing, transporting, operating, fuel and/or charging, and recycling and disposal of vehicles. This is in line with the global approach towards lifecycle assessments of the potential environmental impact of a product throughout its lifecycle.
The Prius – one of the many models in Toyota’s range of hybrid electric vehicles.
Full line of Low Emission Vehicles
As part of this strategic initiative, the carmaker will produce a full line-up of Low-Emission Vehicles which will have electrified powertrains. There will be various powertrains to meet diversified mobility demands all over the world as well as the different rates of vehicle electrification.
“Toyota’s global direction is to achieve carbon neutrality by 2050. This is also in line with the Malaysian government’s aspirations to position the country as a progressive nation that promotes more green technology and environmental sustainability,” said UMW Toyota Motor’s Deputy Chairman, Akio Takeyama.
“This is indeed an exciting time for the Malaysian automotive industry and UMW Toyota Motor is fully charged and ready to champion this Malaysian dream. In order to achieve this, the most realistic, practical and immediate solution is Toyota Hybrid Electric technology and vehicles,” he added.
Toyota is among the pioneers of mass-produced hybrid electric vehicles, having started selling them in the late 1990s. The hybrid technology has also been used in Lexus models like the CT-200h (shown below).
A pioneer in hybrid technology
Toyota has long experience in electrification and was a pioneer in the production and marketing of hybrid vehicles. Since the late 1990s, the company has sold more than 17 million hybrid electric vehicles as well as Hydrogen Fuel Cell Electric Vehicles (FCEV) worldwide.
This number of vehicles with low emissions has made Toyota’s cumulative contribution to CO2 reduction amounting to 140 million tonnes of CO2, or approximately 1.5 million conventional passenger vehicles per year over the past 20 years.
The CO2 reduction will continue and even increase as TMC aims to sell 8 million electrified vehicles annually by 2030. In April this year, the company announced an electric vehicle strategy that will see 15 new Battery-Electric Vehicles (BEVs) introduced by 2025. Including FCEVs, the total number of electrified vehicle models will be 70 by 2025.
Located in Bukit Raja, Selangor, Assembly Services Sdn Bhd (a subsidiary of UMW Toyota Motor) currently assembles the Yaris and Vios models. It began operations in January 2019.
RM270 million additional investment
Toyota’s operations in Malaysia, via the 39-year old joint-venture UMWT, will support the ‘big picture’ in achieving carbon neutrality by investing RM270 million in its manufacturing operations. This amount includes, amongst others, the introduction of a new and technologically-advanced generation of hybrid models.
“We are ready [with the introduction of Hybrid Electric Vehicles], and the technology; service support; current infrastructure; global and domestic policies; the level of affordability and cost effectiveness; and, consumer awareness and demand, particularly in Malaysia, are now at its most ideal conditions to pursue a new and exciting journey towards achieving carbon neutrality,” said Mr. Takeyama.
While neighbouring countries are encouraging the introduction full electric vehicles, Mr. Takeyama said that research has shown that the reduction in CO2 emission levels between fully electric and hybrid electric vehicles are almost similar when considering electricity source, and from production and throughout ownership.
For Malaysian consumers, the local assembly of Toyota hybrid vehicles will mean they are offered at a price point that is practical and accessible to the greater masses. “While time is still needed for full electrification, the hybrid electric technology is ready today and the current infrastructure permits it to be rolled out on a greater scale in Malaysia,” added Mr. Takeyama.
The locally-assembled Camry Hybrid introduced in 2015.
The time-frame for the introduction of locally-assembled hybrid models is not known yet, but this will not be the first time that UMWT is selling and assembling hybrid models for the Malaysian market. During the period when the government provided full duty exemption on hybrid and electric vehicles, UMWT imported models such as the Prius, Prius c and Lexus CT-200h. Later on, it assembled the Camry Hybrid which could be sold at a competitive price due to incentives offered by the government.
The investment will be additional to the RM2 billion that was made the construction and commissioning of a second assembly plant in Bukit Raja, Selangor, which began operations in January 2019. The original assembly plant, which continues to operate in Shah Alam, was among the earliest assembly plants in Malaysia and was one of the largest as well.
Other environment-related initiatives
“As a manufacturer, the immediate steps we can take to prevent global warming are to address our vehicles and manufacturing processes. But the initiatives do not and cannot stop here. It involves a conscientious change in mindset in society, educating the young of the importance of protecting the environment and requiring the active participation of all stakeholders,” said Ravindran K., President of UMW Toyota Motor
He added that that the interests of both Toyota and UMWT have gone beyond the automotive realm to offset the effects the CO2 emissions. For example, UMWT continues to be at the helm of numerous environmental initiatives. For 20 years, it has organised the Toyota Eco Youth program to cultivating environment consciousness and innovation amongst the youth of the nation involving schools, secondary school students and teachers.
“The ultimate goal will not rest solely on vehicle electrification, but to achieve carbon neutrality and zero emissions on all fronts – from putting cleaner vehicles on the road and addressing manufacturing processes, to helping to create greater awareness for the protection of the environment,” said Mr. Ravindran.
Mr. Ravindran believes the introduction of Hybrid Electric technology will quickly transform the automotive landscape in Malaysia for Malaysians. “We hope that our endeavours to popularise tomorrow’s technology today through the mass introduction of Hybrid Electric Vehicles (HEV) will receive due support from the government in the pursuit of a full-scale realisation of vehicle electrification. We hope that the government will also consider UMW Toyota Motor’s efforts to be included in the National Low Carbon Mobility Blueprint alongside Battery Electric Vehicles which is in line with the government’s plans,” he added.
The current ‘full lockdown’ imposed by the stricter Movement Control Order is expected to affect the retail operations of many businesses. In the auto sector, showrooms must remain closed although aftersales services at service centres are allowed to operate. This will certainly have an effect on the Total Industry Volume (TIV) again, as it did a year ago when sales plummeted to nearly zero.
Best export performance since 2013
Proton cannot escape such effects but it is counting on export sales to help offset the downturn. Its International Sales Division has been recording increased numbers, with May 2021 being the best export sales month since March 2013. A total of 669 vehicles was sent overseas and up to the end of May, the export volume is 174% of the target set and only 6% behind what was achieved for the whole of 2020.
Proton’s growth in export sales is due to growing demand in several key markets, some new and some having sold Protons for decades. For example, Pakistan is a new market for the company and in the first 5 months of 2021, it was by far the best performer.
New Proton models draw crowds at a showroom in Pakistan.
Brunei, which started selling Proton vehicles as far back as 1987, was the third biggest export market by volume this year and in May, importers PAD Motors had the best sales month in the company’s history. In Egypt too, Alpha Ezz El-Arab, the importer and distributor for Proton cars, ordered and received 350 units this year, making it Proton’s second largest export market.
More exports in 2021
“At the beginning of the year, our plan for 2021 was to aggressively grow Proton’s export sales volume. Despite international restrictions and the rising cost of shipping caused by the coronavirus pandemic, we were confident of being able to meet our goals due to the sales plans of our importers and the appeal of our products. After 5 months, however, we are close to doubling the volume target set, which hopefully is a sign for more success in 2021,” said Steven Xu, Director of International Sales.
Although the present situation has slowed down new orders in the domestic market, demand has been high, and Proton’s factory is ready to meet this demand. For export markets, its longer term goals will be met by having some models assembled in certain countries. It has begun local assembly for the Saga in Kenya, and the next market to assemble cars locally will be Pakistan.
X70 SUV will be assembled in Pakistan as well.
“If everything goes to plan our partner in Pakistan, Al-Haj Automotive will begin assembly operations with the Proton Saga by the end of July or early August at its new plant in Karachi. The Proton X70 will be added to their production line later, and we have high hopes this development will spur sales growth in the South Asian region,” said Mr. Xu.
ASEAN sales vital for future growth
While growing sales in export markets is a reassuring sign of wider acceptance of the Proton brand and its products, the key to achieving the company’s long-term goals remains sales growth in ASEAN. The region is hotly contested with many global brands having invested in production facilities that supply local and export markets as well as competition from local manufacturers.
Proton aims to be third bestselling brand in ASEAN and has plans to return to Indonesia and Thailand.
Currently, Proton’s presence in ASEAN is limited to Brunei but the company has plans to return to the two biggest markets in the region – Thailand and Indonesia, in the very near future. “For Proton to be the third best-selling brand in ASEAN, we need to have a major presence in Thailand and Indonesia. As the biggest automotive markets in the region, they offer enormous volume potential, but the level of competition is also very high. For both countries, we have been busy recruiting partners to build a network that ensures a viable business model and in the short term, our target is to return to Thailand in 2022,” Mr. Xu added.
Source: Monthly reports of Malaysia Automotive Association
A year ago, new vehicle deliveries stopped as the first Movement Control Order (MCO) was in force although 141 vehicles still reached their customers. A year later, although the MCO is still in force in varying degrees, sales and deliveries continue and in April 2021, the Total Industry Volume (TIV) was the third highest in 12 months with 57,912 units registered.
Cumulative sales for the first four months of this year compared to the same period in 2021 were 89% higher,as would be expected with sales in March and April 2020 having been impacted severely and dropping to the lowest level ever.
For some brands, new vehicle supply was also a factor in April sales being 12.3% lower than March due to the global shortage of computer chips used in the many electronic systems in cars today.
On the production side, it was the same thing a year ago as plants were also ordered to stop operations and only 275 units were reported to have been completed in April 2020. This year, 51,390 vehicles were assembled locally during the same month. As mentioned earlier, shortage of computer chips – a crucial item – saw production dropping diminishing.
93% of vehicles assembled locally were passenger vehicles (excluding pickup trucks).
It should be noted that the as Mercedes-Benz Malaysia does not wish to reveal its sales numbers, they are not included in the data above.
Forecast for May
The Malaysian Automotive Association expects the TIV to continue falling, and May registrations are likely to be lower than April. Although the latest MCO allows for businesses and factories to continue operating, stricter controls on public movements may dampen sales.
Besides the effects of the MCO, the Hari Raya festive period would also be a factor in diminished sales volume. Additionally, supplies of vehicles are also likely to remain affected by the chip shortage.
After Naza’s swift termination of its involvement with the Kia and Peugeot brands during the last quarter of 2020, the market was curious to see who would take over the brands. By December, one part of the question was answered when Berjaya Auto Alliance Sdn Bhd (BAASB) was announced as the new distributor for the French brand. BAASB is a joint venture between Berjaya Corporation and Bermaz Auto, the latter already established as the distributor of Mazda vehicles.
Kia took a bit longer but Bermaz Auto (or BAuto) was a strong candidate and today, that has been officially confirmed with the full details announced at a press conference. A subsidiary of BAuto, Dinamikjaya Motors Sdn Bhd (DMSB), will be the sole distributor while another company – Kia Malaysia Sdn Bhd – has also been formed to manage the assembly of Kia vehicles locally and Kia Motors has majority share in this company.
A fist-bump between Tae-Hun Lee, President & CEO of Kia Asia-Pacific (left) and Dato’ Seri Ben Yeoh, Executive Chairman of Bermaz Auto, after exchanging documents to start off the new relationship between the two companies.
Joint-Venture and Distributorship agreements
Commenting on this development, Tae-Hun Lee, President & CEO of Kia Asia-Pacific, said: “After months of searching for the right partner, Kia is delighted to enter into the Kia JV and Kia Distributorship with Bermaz Auto. With BAuto’s proven capability in successfully building up automotive marques in Malaysia and the Philippines, as well as their automotive manufacturing experience, we believe we have placed the Kia brand in good hands under the capable leadership of its Executive Chairman, Dato’ Seri Ben Yeoh.”
While the matter of continuing its presence in the Malaysian market is settled, Kia is also looking at making its assembly operations Malaysia a hub for supplying vehicles around the region and possibly beyond. In as far as ASEAN is concerned, the Free Trade Area (AFTA) agreement provides for duty free import of vehicles by an ASEAN country of the vehicle is produced within the region. However, the level of ASEAN-sourced content must be at least 40%.
The first two models to be assembled in Malaysia will be the Seltos (above) and the 4th generation of the Carnival MPV which was launched in Korea in August 2020.
Due to current government policies and incentives, vehicles assembled in Malaysia can be sold at more attractive prices in the local market, enabling growth of volumes. However, Dato’ Seri Yeoh said that the locally-assembled models won’t be available for at least 12 to 18 months as that is the time that will be needed to prepare the plant and get suppliers of certain parts.
Local assembly to be at Inokom plant
The plant to be used is Inokom Corporation in Kulim, Kedah which is majority owned by Sime Darby Berhad. The other shareholders are Bermaz Auto and, interestingly, Hyundai Motor Company (15%). The Korean carmaker was actually an original investor in the plant when it began operations in 1997 and in those early years, Renault also had a share. Both Hyundai and Renault assembled some products that were sold under the Inokom brand then.
In the meantime, DMSB will distribute models that are imported CBU (completely built-up) from Korea. There are some stocks remaining from Naza’s inventory which will be taken over and sold through the Kia network which has 30+ dealers presently.
The Inokom factory in Kedah where vehicles from the BMW, Hyundai, MINI and Mazda brands are currently assembled, with Kia to be added next year.
Three models to be assembled
At least three models will be assembled locally and the first two have already been identified. They will be the Seltos, a small SUV, and the new generation of the Carnival. The third model will be decided later. When exports do begin, possibly in 2023, the first market is likely to be the Philippines as BAuto already has its own subsidiary there handling the Mazda business. Of course, a new operating unit will be set up for Kia, and the same will apply in Malaysia although some of the key figures at the top will be the same for all the brands.
The most notable is Dato’ Seri Ben Yeoh who has decades of experience in the auto industry. He started off in the 1970s at Cycle & Carriage Bintang and was involved in Mercedes-Benz vehicles, and then spent time over the following decades involved in brands such as Toyota, Daihatsu, Proton, Hyundai, Skoda and Mazda. He is therefore familiar with Japanese, European and Korean products and is helping develop the next generation for the auto business.
Dato’ Seri Ben Yeoh (left) and some of the members of his team who have set a good track record of building up the Hyundai and Mazda brands.
He is aware of the legacy issues relating to Kia vehicles and said that DMSB will examine all past promises to customers and see how to best move forward with existing owners. Given the track record shown in building up the Mazda brand in Malaysia, many expect that he will put a shine on the Kia brand in due course. He said that he is also pleased that Kia Motors has a share in the joint-venture as this demonstrates that strong commitment and support for the business.
Dato’ Wong Kin Foo, who will head the Kia business, has previously been in a company that also handled Mazda, Peugeot and Kia. This was during the 1990s when Cycle & Carriage Bintang was the distributor for the brands. He will also be heading the team at BAASB which handles Peugeot and is a director of Bermaz Motor which handles Mazda.
The Inokom plant is very familiar to the BAuto leadership, some of whom were in its management in its earliest days. They also began local assembly of Hyundai models during the days when Hyumal was the distributor and 10 years ago, they returned to being involved at the plant when local assembled of Mazda vehicles began again. Soon, they will be planning for the assembly of the Seltos and Carnival.
At the beginning of this year, Kia introduced its new brand logo and also announced a bold transformation strategy.
Kia’s bold transformation underway
The timing for BAuto to associate itself with Kia is also good, as it was when the company took over the Mazda franchise in 2008 from Cycle & Carriage Bintang. At that time, Mazda was starting with to introduce a completely refreshed range of models, all of which would prove highly appealing to customers and boost sales quickly. Likewise, Kia started this year with the unveiling of a new corporate logo which also marked the start of a bold transformation which will see the revamping of nearly all facets of its business to establish a leadership position in the future mobility industry.
The Korean carmaker’s long-term business strategy, which has the ambition to take a leading position in the global car market, will include popularizing electric vehicles. A global EV business strategy aims to put the brand in a leadership position and to achieve this, Kia will launch a diverse range of dedicated BEVs (Battery Electric Vehicles). “The next generation products are sustainable, focusing on high electrification, active safety, connectivity with many autonomous features and are highly human-centric,” observed Dato’ Seri Yeoh.
Kia will be focussing more and more on electrically-powered vehicles and aims to become a global leader in the field.
Dato’ Seri Yeoh said that while it is evident that Kia is strongly focusing on EVs, such vehicles may not be offered so soon in Malaysia. He has always been pragmatic in his approach to business and he believes that consumer acceptance needs to be stronger. That is the same sentiment that other companies have as the government is not pro-active in the area of electric vehicles. While governments in neighbouring countries have announced and even implemented sound policies and incentives that are attractive and give carmakers confidence to invest, Malaysia is still not doing the same.
Calling existing Kia owners
In the meantime, DMSB, as the new distributors, would like all existing owners of Kia vehicles in Malaysia to provide their details so that they can be registered in the database. This is especially important for those whose vehicles are still under warranty. It is almost certain that as a responsible manufacturer, Kia will honour whatever warranties have been given with their vehicles sold previously but DMSB will need owners to provide information. Furthermore, being registered in DMSB’s database means that any recalls or other notifications will be communicated to them. To register details, visit this website: Kia Customers’ Information Update.
Porsche to assemble in Malaysia? That’s the current topic among enthusiasts following a report in The Edge Weekly. The business website mentions that its source has said the investment has been approved by Malaysian authorities and that the assembly will be done at the Inokom factory in Kedah.
It would be quite an unusual development for the German sportscar maker as it has never built its cars outside Germany. It has two factories – the original one at Zuffenhausen and the 19-year old one in Leipzig. In its 2019 financial year, total production from the two factories was almost 275,000 vehicles.
Porsche has come a long way from the time it began making sportscars in the 1950s. Today, it has two factories supplying to the whole world – the original one from the 1950s in Zuffenhausen (below) and a second one in Leipzig (bottom), both in Germany.Porsche builds its vehicles for the whole world at just two facrories – the original one from rhe 1950s in Zuffenhausen and a second one in Leipzig (below), both in Germany.
Porsche being a strong brand, demand for its products has always been good although the coronavirus pandemic which impacted the auto industry did result in a 12% decline in deliveries last year. In the first half of 2020, Porsche sold 55,550 vehicles to customers in the Asia-Pacific, Africa and the Middle East regions, with China’s intake of 39,603 units making it the biggest single market worldwide for the carmaker.
So is it time for Porsche to establish a production hub in the Asia-Pacific region? Bear in mind that the 100,000+ volume is made up of 5 model lines with the specialized all-electric Taycan being the sixth. Obviously, assembling outside Germany would not involve all the models so it would be one or two, with the Cayenne being the most popular so it could be a good candidate.
Manufacturers invest in overseas production facilities in places where they can get good incentives by government to do so. They obviously require a good infrastructure as well. At one time, the potential domestic market volume was important since they would assemble in another country and primarily want to sell there, with exports being secondary. However, with the formation of the ASEAN Free Trade Area (AFTA) as a single trading bloc and duty-free exchange of goods, it is no longer just one country to look at but the potential of regional volume, which can be quite big.
Local assembly of vehicles in Malaysia began in 1967.
Up till the 1980s, Malaysia was an excellent place for any carmaker to have a production base. It had a good infrastructure, a well educated workforce which was also familiar with the English language, a stable government and a growing economy. It had begun local assembly activities in 1967 so a broad range of locally-made components was available. Manufacturers who chose to assemble locally had their vehicles taxed at lower rates so they could be priced attractively.
However, things changed after the mid-1980s when Malaysia decided to have its own National Car, with the government being an investor in the project. Naturally, it had protection so it could compete against established brands and with the protection, the playing field was no longer level like before. The market came to be dominated by one brand while others had to fight in a far smaller slice of the market.
In the interests of ‘free trade’ and also as a member of the World Trade Organisation, the government never stopped anyone else from selling in Malaysia. They were welcome to import their vehicles in CBU (completely built-up) form and pay much higher taxes, or assemble them locally and have lower taxes but still more than what Proton had to pay.
While having a national car, the government nevertheless wanted to also make Malaysia a production hub in ASEAN. However, it basically wanted carmakers to build their factories in Malaysia but export almost all the production; the domestic market was to be left alone. While this may be fine in theory, as mentioned earlier, manufacturers prefer to look at the domestic market first. If they are to export to another country, why can’t they do it from their own factories in Japan or Europe? The shipping costs would be the same anyway and they would probably have lower production costs as well as the vehicles would be made in high-volume factories with better economies of scale.
The AFTA agreement helped but Malaysia has so far not benefitted much. When the manufacturers first learnt of the single market being formed, and the ability to export around the region without import tax, they were attracted. The market size estimated when AFTA was signed in the early 1990s was about 550 million consumers, with many steadily moving upward economically, and a potential GDP of US$750 billion.
So they looked at making investments and besides incentives, they also looked at domestic market potential. Malaysia was seen as ‘protected’ so it was not seriously considered, not that the government really cared since Proton was selling everything it could make anyway. So Thailand, where the playing field was seen as level, got big chunks of investment as Ford and GM built brand new factories to make their products for the region. Indonesia too saw investments with the aim of expanding existing factories to produce more and export.
Ford did consider Malaysia and had a plan to make the Escape SUV in Malaysia for the region. The plans were confirmed but then Malaysia decided that it did not want to open up as planned under the AFTA agreement because it said that its auto industry had been battered by the Asian financial crisis. It needed some extra years to recover, so the market had to stay closed. A frustrated Ford, realizing that it would not be practical to use Malaysia, tore up its plans and put its money into the Philippines where it had a factory.
Only Volvo seems to have chosen Malaysia as a hub of sorts but that is more a historical thing. Its factory here was the first to open when Malaysia began calling for local assembly and although it had production in Thailand, that was closed down and everything concentrated in this country for the region from 2012.
For the other carmakers, Malaysia was still and attractive market because it was the largest passenger car market in ASEAN. Thailand was a pick-up truck market and in Indonesia, the biggest demand was for MPVs. So in spite of the difficult environment, many carmakers continued to operate in Malaysia, make the necessary investments periodically to upgrade their plants and kept refreshing their model lines.
Porsche has been officially in Malaysia for a long time, with Sime Darby Auto Performance representing the brand since 2010.
But the much desired objective of the government – to be a regional production hub – remained elusive. There have been a few National Auto Policies (NAP), each one stating that aim, and offering various types of incentives without much detail. The general way that the Malaysian government’s Ministry of International Trade & Industry has liked to operate is with ‘customised’ incentives, perhaps believing that the approach would be more appreciated by investors.
However, many in the industry have expressed a dislike for the approach, preferring the details to be open for all to know and work with. Transparency is important for these businessmen, and as one veteran industry executive said, “How can I know that my competitor might have received a better incentive but actually invested less?”. So the has remained an indifference and even with the latest NAP announced a year ago, the lack of transparency and detail continued. Many people were disappointed that only an outline was provided and could not even begin to start working out plans to propose to their head office. Anyway, since then, the government has changed so it could be that the NAP will see a revised form, depending on the MITI minister.
For many years. Daihatsu has been taking the Myvi made in Malaysia and selling it as a Daihatsu Sirion in Indonesia. Mazda has also been exporting the CX-5 assembled in Malaysia (below) to Thailand.
Over the past decade, some companies have tried to export from Malaysia with limited success. Perhaps only Volvo and Mazda (with the CX-5) have been doing well with exports but Toyota started and stopped exporting its Malaysian-made Hiace to Thailand. Proton and Perodua export, of course, and of note is the fact that the Myvi made in Malaysia is taken by Daihatsu for sale in Indonesia as a Sirion under its own brand. That says a lot about Perodua’s quality as a Japanese carmaker would not simply use a product made by someone else.
Porsche and Sime Darby
The report by The Edge Weekly mentions that Porsche will use the Inokom plant in Kedah, which is not surprising. The plant, opened in the late 1990s, is owned by Sime Darby and a unit of the company is also the importer and distributor of the German sportscars. It would make things a lot easier for the same parties to also work together on an assembly project.
If Porsche is indeed going to do it, then it will not just be an assembly program to set up. The carmaker has not done completely knocked-down (CKD) activities before so it will have to set up a new department just for it. Perhaps, being in the Volkswagen Group, it will be able to get assistance from its colleagues in Wolfsburg as there is local assembly of some Volkswagen models being done in Pahang.
The Inokom factory in Kedah which assembles vehicles from the BMW, Hyundai, MINI and Mazda brands.
It is not just a matter of picking a model and putting it into a box in disassembled form for assembly in another country. The model has also to be engineered for local assembly, taking into account the level of automation and capabilities of the workforce. This is often the case with picking models for overseas assembly. Volvo had to first invest in laser welding equipment before it could consider assembling the XC60 in Malaysia.
The two Porsche factories in Germany are very advanced with manufacturing processes that ensure high quality. It is unlikely that all the manufacturing processes at Inokom will be identically advanced, so some modification may be needed, and that means an engineering program to develop a ‘Malaysian CKD model’.
It is possible that the ‘SKD’ (semi knocked down) approach will be taken although this approach was stopped by the government in mid-2019. With SKD, bodyshells can be imported already welded together. While the government no longer allows SKD, one never knows with a ‘customized incentive’ and also, the government of today is not the same one that formulated the 2020 NAP.
The Cayenne SUV would be a good candidate for assembly as it is popular throughout the region.
Righthand drive or lefthand drive? This is also another issue, especially if the volume is not going to be very big. What some carmakers have considered – Geely and Great Wall Motors being among them – is that a production hub in ASEAN could be dedicated to righthand drive (RHD) versions which they do not make in their own country. This is more applicable to the Chinese carmakers though as the other global players have long coped with making cars with the steering wheel on either side. So Malaysia could be designated to make RHD models for most of the ASEAN markets and when volumes get higher, then they can also consider LHD.
As for quality, there is nothing inferior about Malaysian assembled vehicles today. The manufacturers have many processes that ensure the quality standards are very high, even if they might not be exactly similar to those of factories in Japan or Germany.
The only thing is consumer perception even though one can say that in this era of globalization, people don’t really care as long as the quality is not poorer. Many years ago, when Proton was assembling the Lotus Elise and tried to export it to Japan, the customers there indicated that if they wanted to buy a Lotus, it had to be made in England. Likewise, when Mazda and Toyota wanted to source some of its models from Thailand for its ASEAN markets, customers in Singapore did not want them and wanted to have cars from the Japanese factories.
Finally, the price – which is often the first thing Malaysians think of when they hear that a model will be assembled locally. For a long time, they have been conditioned to expect that a model that is assembled in Malaysia will be cheaper and that is because there is a lower tax rate and in more recent times, the government also rewards those who make investments with subsidies that can offset production costs to allow lower retail prices. So yes, a locally-assembled Porsche could be cheaper though probably not by a huge amount.
‘CKD’ is something which car-buyers may read about and some may wonder what it means. The initials stand for ‘Complete Knocked Down’ and refer to the way a vehicle is shipped to Malaysia. If it comes in a completed form, ready to be driven, then it is referred to as ‘Completely Built Up’ or ‘CBU’. If it comes in a disassembled form with many parts in boxes, and the parts are then assembled to form the vehicle, then it is a CKD model.
The concept of CKD began many decades ago when manufacturers wanted to be able to produce more vehicles for a market. Sometimes shipping vehicles in CBU form was not practical or feasible, or restrictive regulations made it difficult to sell CBU models. So vehicles were sent in parts in a box – like a Tamiya model – which could then be assembled in another country. The investment was lower than to build a factory and governments also liked it because there would be employment and transfer of technology.
Workers packing parts for the Beetle in 1955. More vehicles can be sent in CKD form than CBU form.
Assembly in Malaysia started in 1960s
In fact, in the mid-1960s, the Malaysian government decided to encourage the assembly of vehicles locally as a means to industrialize and also create more jobs, as well as benefit from transfer of technology. While it would have wished that factories could be built, the market size was too small, so the first step was an assembly plant and as an incentive, the tax rates for models assembled in Malaysia would be lower than for CBU models.
A number of manufacturers responded positively, especially as Malaysia then was a very good place for a carmaker to carry out such activities. It was developing rapidly, had a stable economy and society and the workforce was also well educated. Additionally, more vehicles can be sent in CKD than CBU form.
CKD packs are put into containers and then shipped by land, air, sea or rail to countries around the world.
The first assembly plants were opened in the second half of the 1960s, mostly situated in Shah Alam. Selangor. Carmakers in Europe, Japan and Australia began sending over CKD packs for their models to be assembled locally. To encourage the development of a local auto industry, the government also specified a list of parts which should be sourced locally. These were things like paint, windscreen glass, tyres, batteries and wire harnesses.
Volkswagen was one of the early carmakers to assemble its cars in Malaysia, starting with the Beetle. In fact, the German company had been exporting the Beetle in CKD form since 1950. In Malaysia, the packs which arrived in Port Klang were sent to the Assembly Services plant in Shah Alam. This plant was huge in its early days and assembled a variety of models from different brands as well as large commercial vehicles. With a CKD operation in place, Malaysia was added to Volkswagen global production network.
The CKD packs are usually wooden boxes and contain a number of parts, big and small, which are then transferred to the assembly line within the HICOM Automotive Manufacturers complex.
How the process works
The CKD process is slightly different from the CBU one which is pretty much just ordering whole vehicles with the required specifications. With CKD, thousands of parts must be collected and in the case of Volkswagen, the coordination is done at Wolfsburg, its home city in Germany. Orders received from all over the world are processed centrally in Wolfsburg and a supply management team ensures that the parts required are available from the different European plants and suppliers.
The source for the type of item will be different; body panels and engines, for example, may come from Volkswagen’s own factories but parts like instrument panels and seats might be from suppliers. The parts used to be packed in the boxes manually, but high-tech systems are now used. The parts are bundled and packaged at one of the 8 distribution centres, loaded into containers and shipped by sea, rail or air to the different countries.
These 8 centres handle a total of about 1.7 million cubic metres of goods every year, corresponding to about 25,000 overseas containers. From the receipt of an order, it takes about 8 weeks before the CKD packs for a vehicle is delivered in the destination country. All in all, about 90 different vehicle projects of overseas plants are supplied via CKD from Europe.
Today, Volkswagen has 27 assembly locations in 10 countries. The largest CKD assembly plant is located in South Africa and it not only serves that market but some of its output is also exported to other countries. So it is also a production hub for certain models.
A Volkswagen Polo being assembled at the plant in Pekan, Pahang.
Quality assured even with local assembly
There are also plants located in the USA, China, Brazil, Argentina, India, Malaysia and Indonesia. In some cases, the assembly may be carried out by a local business partner. In Malaysia, Volkswagen works with HICOM Automotive Manufacturers which has a manufacturing complex in Pekan, Pahang. Of course, quality is assured as Volkswagen personnel are also present to assist and conduct inspections on every vehicle.
“We used to need only one or two faxes per week for coordination with the overseas plants. Nowadays, we work with our production plants on a real-time basis and manage about 9,000 part numbers for worldwide shipment. The tasks of our employees have changed fundamentally – they are no longer simply box-packers but are now logistics data experts,” noted Burkhard Husken, Head of CKD of the Volkswagen Passenger Cars brand.
Those who have booked a Mitsubishi XPANDER can expect their new 7-seater crossover soon. The first units have been completed and will soon be leaving the plant at HICOM Automotive Manufacturers Sdn Bhd in Pekan, Pahang. Malaysia is the third country to locally-assemble the XPANDER, following Indonesia and Vietnam.
The plant location would be familiar to Mitsubishi Motors as the Pajero (and earlier models of Mitsubishi pick-ups and vans) used to be assembled there in the 1990s. Mitsubishi Motors Malaysia (MMM) has its own dedicated area for assembling the XPANDER at a rate of 6,000 units annually.
MMM invested in setting up an all-new Body Shop, Painting Jigs and Tester Line at the plant. The Paint Shop is said to be one of the most advanced in ASEAN. Complete immersion and coverage with protective primer paint is achieved during the Electro-Deposition (ED) process with the 360-degree rotation of the vehicle in the tank. Conventional ED processes usually just dip the body at one orientation.
Robots are used for consistent application of multiple coats of paint to ensure a high quality finish. To ensure that the XPANDERs assembled in Malaysia meet the high standards set by Mitsubishi Motors, there are auditors from the Japanese manufacturer who constantly carry out checks.
“We ensure all our customers that each unit of the XPANDER undergoes extensive quality control tests before it is shipped out. Every inch is checked by human-eyes and cutting-edge technology,” said the CEO of Mitsubishi Motors Malaysia, Tomoyuki Shinnishi.
Mr. Shinnishi said that the XPANDER is being assembled locally to achieve a more competitive and attractive price, with better specifications providing customers more convenience and comfort. “The XPANDER is a significant model for MMM and we are confident that it will be a favourite among many Malaysians,” he added.
Since its launch in Indonesia, some 270,000 units of the XPANDER (including the XPANDER Cross variant) have been sold across ASEAN. It will be in showrooms next month and come with a 1.5-litre MIVEC engine. Pricing has not been revealed but is expected to be under RM100,000. Visit www.mitsubishi-motors.com.my to locate a showroom to view and test-drive the XPANDER and other Mitsubishi models.
Besides the XPANDER, MMM also assembles two SUV models in Malaysia – the Outlander and ASX – at the Tan Chong plant in Kuala Lumpur. Its most popular model, the Triton, is imported from Thailand in CBU form.
BMW M GmBh is the high-performance subsidiary of BMW AG which has its own line of models. Until now, these models were only available for the Malaysian market in CBU form, imported from Germany. This, of course, meant higher import duties payable, bumping up their price.
Now, if you want the M340i xDrive, you can get it for a lower price and it doesn’t have to be a grey import either. Thanks to BMW Group Malaysia’s decision to assemble the model locally, it is available brand new for RM402,354.13 (excluding insurance, with full Sales Tax exemption), the first time a M model has been assembled in Malaysia.
Derived from the 3-Series, the M340i xDrive has the same athletic design with sportier elements. The locally-assembled version comes with the M Aerodynamics Package and BMW Individual High-gloss Shadowline trim. A metallic Cerium Grey finish is applied on items such as air inlets in the front bumper, the kidney grille and its surround, along with the exterior mirror caps.
Most powerful 3-Series derivative
The M340i xDrive has the most powerful engine in the 3-Series range, a TwinPower Turbo 6-cylinder petrol unit producing 387 bhp/500 Nm. All that output goes through an 8-speed Steptronic Sport transmission and is then distributed intelligently by BMW’s xDrive system to all four wheels.
The all-wheel drive system, which has its origins in the 3-Series of 1985 (325iX), has a sporting rear-wheel bias, while modified power steering provides noticeably more direct feedback. The M Sport differential optimises traction and driving stability when cornering at high speeds or accelerating out of a bend, changing lanes or on different road surfaces.
With all-wheel drive transmitting the power efficiently to the road, the M340i xDrive can go from 0 to 100 km/h in a claimed 4.4 seconds and on to a top speed of 250 km/h. A combined fuel consumption figure of about 13 kms/litre is claimed although that would be when the driver is not enjoying the full performance of the car.
Maximising performance
Also contributing to maximised performance is variable sport steering and the specially-tuned 10 mm-lowered Adaptive M suspension. This can be electrically adjusted at any time to suit the road and driving conditions.
All that power needs good stopping power too and the engineers at BMW M have developed M Sport brakes for the model. Mounted behind 19-inch M wheels (with runflat tyres), these have 4-piston fixed calipers at the front and single-piston floating calipers at the rear in blue with the ‘M’ designation. The use of large-diameter discs increases the surface area available for braking.
The M environment within
Though derived from the 3-Series, the cockpit has M-specific philosophy which gives a sportier environment within. Standard equipment includes sports seats for the driver and front passenger upholstered in Leather Vernasca (Black or Cognac, with black decor stitching), an M leather steering wheel, front door sill finisher with illumination, and a BMW Individual headliner in Anthracite. M-specific pedals, M-specific floormats, and interior trim finishers in Aluminium Tetragon with highlight trim finisher in Pearl Chrome are also present.
Convenience features include automatic 3-zone air-conditioning, the Comfort Access system with contactless opening of the tailgate, while entertainment is delivered via a 16-Speaker Harman Kardon Surround Sound System.
The BMW Live Cockpit Professional has a fully digital 12.3-inch instrument panel, complemented by the BMW Navigation System Professional with a 10.25-inch touchscreen. Also standard is the Head Up Display that projects information on the windscreen and an electric glass roof.
Advanced safety systems
BMW M has made sure that the M340i xDrive’s high performance is matched with advanced safety systems. Besides powerful BMW Laser Lights with high beam assistant up front, there is the Driving Assistant which includes Lane Change Warning, Crossing Traffic Warning at the rear, Rear Collision Warning, and Speed Limit Assist.
In the event that the driver become drowsy or loses concentration, Lane Departure Warning will alert him if the car deviates out of its lane, with active steering intervention to guide it back safely. Autonomous emergency braking occurs automatically taken if a collision is about to occur and the driver has not braked or taken any appropriate action.
The M340i xDrive is available in Alpine White, Black Sapphire, Sunset Orange, and Portimao Blue. As with other new models, it comes with a 5-year unlimited mileage warranty with a Free Scheduled Service Programme, BMW Roadside Assistance and Accident Hotline, The BMW Group Loyalty+ Mobile App – BMW Privileges Card and BMW Service Online.
In showrooms from this weekend
Available at selected authorised BMW dealerships nationwide from this weekend, the M340i xDrive can also be booked at the BMW Shop Online with a transfer of RM1,000. Financing is available from BMW Group Financial Services Malaysia which has monthly instalment plans starting from RM4,468 (terms and conditions apply).
Mitsubishi Motors Malaysia (MMM) will soon launch an all-new model – the Mitsubishi XPANDER. To have competitive pricing, carmakers must assemble their products locally to get incentives that can lower their cost and enable them to have lower retail prices.
MMM is therefore assembling the 7-seater crossover model in Malaysia, its third model to be assembled locally after the ASX and Outlander (the Triton pick-up truck is still imported from Thailand in CBU form). However, unlike the Outlander and ASX, the XPANDER will not be assembled at the Tan Chong plant in Segambut, Kuala Lumpur.
(Indonesian version shown)
New production facility in Pahang
Instead, it will be assembled in Pekan, Pahang, where Mitsubishi Motors’ partner in MMM, DRB-HICOM, has a manufacturing complex also used by Volkswagen, Isuzu and Mercedes-Benz. According to MMM’s Chief Executive Officer, Tomoyuki Shinnishi, the new production facility for the XPANDER incorporates Japanese automotive technology.
The plant has an all-new body welding workshop including new welding equipment. Its paintshop utilises advanced painting technology including a 360-degree ED-coating and a robotic spray system. This will provide high quality finishes and extend corrosion resistance. The XPANDER, which will have a 1.5-litre MIVEC engine, will also go through an all-new tester line to check all safety functions including Active Stability Control (ASC) system.
“The XPANDER is localized to meet the demands of Malaysian customers. It will be priced competitively to cater for families and adventure-seekers who are looking for a more comfortable and practical 7-seater to make their journeys a more pleasant one. Malaysians can expect to place their bookings soon,” Mr. Shinnishi said.
Locally-assembled version of the XPANDER.
As a prelude to the launch, there’s a teaser display of the XPANDER at Mid Valley Megamall in Kuala Lumpur from today until September 13. Those interested to know more and want to receive updates on the new model’s launch can register their interest at www.mitsubishi-motors.com.my.
