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Kia Malaysia reveals 5-year plan with 61% of local production to be exported

After a period of obscurity, Kia is ready to move forward with great determination and has formulated a plan to grow its volume in the ASEAN region. Having established a new business operation in April this year, the Korean carmaker has a partner – Bermaz Auto – which took over the brand from Naza (along with Peugeot as well). Bermaz Auto and Kia have formed a joint-venture company called Kia Malaysia which will manage the brand’s activities in the country. Distribution and retail operations will be handled by Dinamikjaya Sdn Bhd, a subsidiary of Bermaz Auto.

Kia Malaysia’s operations will include local assembly, the first time the carmaker is making a direct investment for assembly operations. It considers this to be a key factor for growth as it will enable Kia vehicles to be sold around the ASEAN region at competitive prices. This is because they can be assembled in Malaysia and exported to other markets without import duties imposed by those countries, a privilege accorded by the ASEAN Free Trade Area (AFTA) agreement.

Previously, there were some Kia models assembled locally but the volume was small and therefore not efficient. Now, Kia has set a target of 100,000 units in total from 2022 to 2026. The vehicles will be for the Malaysian market as well as export. The export plans are ambitious and will account for more than 50% of annual production each year. By 2026, the company expects to export up to 19,000 units from the 30,000 units targeted for that year.

The vehicles – comprising new generations of the Carnival, Sorento, Sportage and Niro – will be assembled at the Inokom plant in Kedah. This plant, which began operations in the 1990s, assembles for brands such as Mazda, BMW and MINI. Incidentally, among the plant’s shareholder’s is Hyundai Motor Company, which is affiliated with Kia in the Hyundai Motor Group. Hyundai’s share is 15% and it has been a shareholder since the plant started in 1997.

From what Kia Malaysia has revealed of the coming products, all four models will be produced with combustion engines as well as electrified powertrains. The Carnival and Sportage will be hybrid electric while the Sorento and Niro will also have plug-in hybrid (PHEV) powertrains. A fully-electric version of the Niro will also be produced, and this would enjoy attractive incentives offered by the government for battery-electric vehicles.

*ICE: Internal Combustion Engine | HEV: Hybrid Electric Vehicle | PHEV: Plug-In Hybrid Electric Vehicle | BEV: Battery Electric Vehicle*

*The Inokom factory in Kedah which will assemble Kia vehicles. It began operations in 1997 assembling Hyundai and Renault vehicles.*

Omitting passenger cars may not be a disadvantage as Kia’s past models have enjoyed limited success. Their SUVs have met with good response and the new Carnival is also a big leap from the previous generation. Now the task for Dinamikjaya will be to assure customers that it will offer the best aftersales support to those who buy a Kia. The company will examine all past promises to customers and see how to best move forward with existing owners.

Teaming up with Bermaz Auto is advantageous for Kia as the team in this company have long experience in all aspects of the auto industry. They are led by Dato’ Seri Ben Yeoh, whose career spans 5 decades, during which time he has been involved in brands like Mercedes-Benz, Toyota, Daihatsu, Proton, Mazda, Skoda and Hyundai. Senior members of his team were even involved in setting up and running the Inokom factory before it was acquired by Sime Darby Motors.

Bermaz Auto takes over Kia business in Malaysia, with local assembly to commence in 2022.

Mercedes-Benz battery pack production facility in Thailand begins operations

With increasing emphasis on electrification of vehicles in the industry, demand for battery packs has also been accelerating. It is crucial that higher volumes be achieved in order to get economies of scale and push production costs down. Different manufacturers have different strategies to address this demand and for Mercedes-Benz, the approach taken is to establish a global battery production network.

Daimler is investing more than one billion euros in this global battery production network which will consist of 9 factories at 7 locations on 3 continents. Four factories have already started operations, with the most recent one being in Thailand.

100 million euros invested
The Thai production facility in the Bangkok region is a joint effort with local partners Thonburi Automotive Assembly Plant (TAAP) and Thonburi Energy Storage Systems (TESM). Mercedes-Benz AG has invested a total of more than 100 million euros in the battery production and a plant expansion of the existing vehicle production plant. In doing so, the partners are responding to the high demand for electric mobility and, in particular, for plug-in hybrid vehicles in Thailand. At the same time, they are driving the shift towards sustainable mobility as well as a carbon neutral and resource-efficient production.

The production facilities for plug-in hybrid battery packs are highly standardised and flexible. As a result, they can be adapted to local market conditions in a short time. “We have been successfully producing Mercedes-Benz vehicles for the local market at our Thai plant for more than 40 years. With the start of production of our battery factory in Bangkok, we are taking another important step in the expansion of our global battery production network at Mercedes-Benz Cars with nine factories worldwide. The local production of batteries enables us to make the best possible use of the potential for e-mobility in Thailand. As in the case of vehicle manufacturing, we have optimized all processes in terms of efficiency, flexibility and sustainability in the battery factory. We show how sustainable products can be produced sustainably,” said Jorg Burzer, Member of the Board of Management of Mercedes-Benz AG, Production and Supply Chain Management.

The battery packs are used for plug-in hybrid variants for the current Mercedes-Benz C-Class, E-Class, S-Class as well as for the Mercedes-Benz GLC and GLC Coupe. The high variety of product variants of the local market require very flexible and efficient production and facility concepts. Central assembly stations were set up in the same way as in the battery factory in Germany and were further developed for site-specific requirements. In this way, all battery types can be manufactured in the new line for all current and future plug-in hybrids.

*Mercedes-Benz C300e – one of the models which will use Thai-made battery packs*

Decision to locate in Thailand
The decision for a local battery production in Thailand supports Mercedes-Benz’s overall sustainability goals under the heading ‘Ambition2039’ as well. The aim is a carbon neutral new car fleet until 2039. By 2030, at least every second vehicle sold should have an electric drive – this includes full-electric vehicles and Plug-In hybrids.

On the way to sustainable mobility, apart from products production plays a central role: All European Mercedes-Benz plants are to produce completely carbon neutral from 2022. The battery factory in Bangkok will meet this requirement by using large solar systems on the roofs of the production buildings. Excess solar power, for example, is temporarily stored in so-called 2nd-life battery storage systems from recycled electric vehicle batteries. The plant works closely with the Mercedes-Benz Energy GmbH. The stationary storage systems, which can compensate for local energy fluctuations and contribute significantly to grid stabilization, enable economical and resource-saving reuse for disused batteries of electric and hybrid vehicles. This is an important contribution to the economic efficiency and environmental balance of electric vehicles.

Besides Mercedes-Benz, the BMW Group has also chosen Thailand to produce battery packs. Its facility is a joint investment with the DRAXLMAIER Group worth 500 million baht (about RM69 million).

Mercedes-Benz is the world’s most valuable luxury car brand of 2019

Production of High-Voltage Batteries for BMW Hybrid Vehicles underway in Thailand

In the early years of the auto industry, the factories that produced cars and the parts for them were once confined only to the countries that the manufacturer was established in (BMW in Germany, Toyota in Japan, Ford in the USA, etc). However, as the auto industry rapidly expanded around the globe and cars were being sold in other countries as well, it made sense to produce them closer to the markets. And from the 1960s onwards, as more countries began industrialising – like Malaysia – incentives were also offered to carmakers to invest in local production.

Globalisation of the industry has led to factories being set up all over the world, some to serve a few markets and some as production hubs for regions or even the entire world. The need to have huge volumes for economies of scale that drive down costs is one reason for this approach. There are also political considerations which come into play as exports of vehicles from one country to another need to be ‘balanced’.

While the construction of new factories to make vehicles is ongoing, there is now a wave to establish factories to supply parts and systems for the coming era of electrification. The next decade will see a leap in hybrid and electric vehicles and demand will be great, so the factories must start up now in order to be able to meet that demand.

Incentives matter as well as policy clarity and stability
Choosing a country to build a new factory requires not just careful planning but also consideration of the incentives offered by the government. The investments and job opportunities as well as export potential are also attractive enough to governments to offer investments to attract carmakers. Clarity and stability of automotive policies is also important as carmakers plan over many years and they need to be assured that changes are not made just because a new minister has taken over and had other ideas about the direction.

Thailand has been good at policy stability, which is probably on reason why a number of global players built their production hubs there. Changes of government may occur but policies are maintained and that’s what matters.

BMW chooses Thailand
Following on from BMW Group Thailand’s earlier endorsement for incentives by Thailand’s Board of Investment (BoI) for a 700 million baht (about RM96 million) outlay in BMW plug-in hybrid electric vehicle (PHEV) production, the company has jointly invested with DRAXLMAIER Group in this battery assembly plant, worth 500 million baht (about RM69 million).

“This new beacon for e-mobility innovations will further unlock the competence of Thailand’s automotive industry. The incentives from BoI also symbolize the unity between the public and private sectors in this undertaking towards a sustainable future,” BMW notes.

BMW Group Thailand has thus marked another historic milestone with the inauguration of a local high-voltage battery production plant in partnership with the DRAXLMAIER Group, one of the world’s leading automotive suppliers and a partner of BMW Group since 1966. BMW Group Thailand launched the local assembly lines in July 2019 at the plant in WHA Chonburi Industrial Estate 2. The high-voltage battery assembly plant is assembling both battery modules and the battery itself.

Uwe Quaas, MD of BMW Group Manufacturing Thailand said: “One of the pillars of BMW Group’s global strategy is electrification, and BMW Group Manufacturing Thailand is underlining its commitment to this mission by taking another big step forward in our electro-mobility strategy. The start of local battery production enables us to better respond to growing domestic demand for electrified vehicles in Thailand. This new capability also strengthens the performance of Plant Rayong in fulfilling the country’s mission of sustainable mobility.”

Fully trained workforce
The high-voltage battery is a central element of partially and fully electrified vehicles and a highly sophisticated component that requires specialized skills to produce. Thanks to the advanced training and qualification programs initiated in September 2018, the staff from the DRAXLMAIER Group who have participated in the battery production training program at BMW’s Group Plant Dingolfing – the BMW Group Competence Centre for e-drive production – and the BMW Group pilot plant for e-drivetrains in Munich, are now ready for the high-tech assembly work to produce the latest generation (Gen4) of the BMW Group high-voltage batteries

This involves the use of cutting-edge production technologies onsite including laser welding, plasma activation, robotics, gluing, automated optical and electrical inline quality inspection along with end-of-line testing. The training is also focused on supporting a highly automated process, which is an important part of battery module production, as well as comprehensive quality assurance, product methodology and technology, rework, and analysis.

World-class standards and quality
Equipped with a strong grasp of battery production skills, the staff will work on battery cells provided by a supplier in the Asian region along with other imported parts – such as aluminium housing, electronics, and cables – to roll out high-voltage battery packs that meet BMW Group’s world-class standard and are in full compliance with Thailand’s local content requirement regulation.

Completed battery packs will then be transported to Plant Rayong for the production of the entire range of BMW 5-Series Plug-in Hybrid Vehicles, which has been in operation since July 2019. Since 2017, BMW Group Manufacturing Thailand has assembled four BMW plug-in hybrids at Amata City Industrial Estate, Rayong province.

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