The government is emphasising the development of the electric vehicle (EV) sector as a significant sub-sector within the New Industrial Master Plan 2030 (NIMP 2030). Deputy Investment, Trade, and Industry Minister Liew Chin Tong stated that policies concerning EVs would be regularly reviewed to bolster the sector’s growth.
According to Bernama, to support the EV sector’s progress, a National EV Steering Committee (NEVSC) meeting will be convened soon. Additionally, plans include the initiation of EV’s Technical and Vocational Education and Training (TVET) programs in early 2024.
It is undeniable that the Malaysian government has introduced a number of EV-specific incentives to promote the use of electric vehicles (EVs), including complete import and excise duty exemptions that are valid through the end of 2025.
Despite this, EVs remain prohibitively expensive for the bulk of the population for one key reason, which is the price of buying one. EVs presently cost above RM100,000 in Malaysia. This is supposedly caused by regulations put in place by the Ministry of Investment, Trade, and Industry (MITI), not because EVs are costly by nature, but something entirely different.
According to a report by SoyaCincau, a new Completely Built Up (CBU) EV may only be imported into Malaysia in accordance with MITI’s Franchise AP policy which states that an EV can only be imported if its list price in our market exceeds RM100,000. This policy will be in effect until December 31, 2025, much like the exemptions from import and excise taxes that we previously indicated.
While the move towards electric vehicles (EVs) has been going on over the past decade, it has only recently gained more attention from the Malaysian government which sees increased use of EVs as one way to meet its carbon neutrality goal by 2050.
While promotion of EVs and providing incentives like tax exemption are approaches being taken, government agencies also need to have a greater understanding of these new energy vehicles in order to formulate the appropriate policies for years to come.
The auto industry is also playing its part to help in different aspects and GWM Malaysia, the local subsidiary of China’s Great Wall Motors, is among those keen to work closely with the authorities. As an example of the support it can give, GWM Malaysia recently presented an ORA GOOD CAT 500 Ultra to the Ministry of International Trade and Industry (MITI) to use for test-drives over the next few months to learn more about EVs.
As speculated in our earlier report, Tesla – the leading BEV company in the world – is coming to Malaysia officially. A statement from the Ministry of Trade & Industry (MITI) today has confirmed that approval has been given for the carmaker, owned by Elon Musk who is one of the richest men in the world, to import Tesla vehicles.
Tesla’s application was considered under MITI’s program to attract Battery Electric Vehicle Global Leaders to invest in Malaysia and develop the EV industry and ecosystem. It is the first company to be given approval under this program and has been allocated APs (Approved Permits) for the importation of its vehicles although the number has not been mentioned, nor if there is a local partner involved. As mentioned earlier, Tesla has a subsidiary company registered in Malaysia which it has 100% ownership of.
Thirteen years ago, the government removed all taxes on hybrids and electric vehicles (EVs) as part of an effort to reduce Malaysia’s carbon footprint and also to try to attract carmakers to make Malaysia the ‘hybrid/EV hub’ of the region. That didn’t work as all it really did was to give a limited group of car-buyers a chance to get duty-free cars.
One company – Honda Malaysia – did follow up and assemble a hybrid model locally, receiving continued incentives for its initiative. However, the removal of the tax-free incentives after a few years saw interest in electrified vehicles lost as their prices became expensive again. Nevertheless, hybrids did start to appear though this was more to do with carmakers themselves switching to hybrid powertrains.
Last year, the government removed all taxes again – but only for battery electric vehicles (BEVs) and not hybrid models (assemblers still get incentives in other ways). The incentives have encouraged importation of many different BEV models, with new brands coming from China. Though the prices remain around RM150,000 (with the exception of the ORA Good Cat), there’s been good demand and for now, there are no units sitting in the stockyard waiting to be sold.
Until recently, any company with an Open AP (Approved Permit to import vehicles) has been able to bring in Lamborghini models, new and used. However, this is no longer the case as we understand that the Ministry of International Trade & Industry (MITI) has given exclusive rights to only one company to import new Lamborghinis under the Franchise AP privileges.
The change, which applies only to importation of new units, has been effective since August 17, 2022, and PEKEMA, the largest group of AP holders in Malaysia, has been informed accordingly by MITI.
The company appointed by Lamborghini as its official dealer for Malaysia is SunAgata Supercars Sdn Bhd (Lamborghini Kuala Lumpur), which began business in April 2021. It has a sales and aftersales facility in Glenmarie, Selangor, which opened in March this year. SunAgata Supercars is among the 22 Franchise AP holders which are currently given exclusive rights to import new vehicles of brands they represent in Malaysia.
About the AP policy The AP policy, which was introduced in 1970, had the objective of helping bumiputera businessmen make inroads in the automobile sector. In earlier years, it was evident that much of the car business was in the hands of foreign companies (mainly British) and bumiputera participation was low. With the AP policy making APs available only to bumiputera businessmen and companies, it was expected that they would be able to become more involved in the auto industry.
The policy was intended to support the development of bumiputeras in the auto industry, but it was not properly managed in its early years. There were parties that applied and received APs but did not make an effort to actually do business. Instead, they merely allowed others to use their AP to import vehicles and charged a fee.
As that was not what the government had created the policy for, there was a review in 1987 and around 150 AP-holders were terminated. With the review also came the introduction of the Franchise AP for legitimate authorised franchise holders for them to import new vehicles of the brand they represented.
The condition, however, was that their company need to have a bumiputera shareholding of at least 70%, unlike the Open AP condition where the company must be 100% bumiputera-owned. For those with Open APs, their companies would have to set up a proper business with a paid-up capital of at least RM1 million and sales and aftersales outlets.
Controversial subject With Malaysia being a member of the WTO (World Trade Organisation), the AP policy has been controversial as it conflicts with free trade practices because issuance of APs is subject to certain conditions. Periodically, there has been talk of ending the AP policy, but the government has found it difficult to remove it due to strong arguments from groups like PEKEMA.
The Technology Transfer Apprenticeship Programme (TTAP) developed by Malaysia Automotive Robotics & IoT Institute (MARii) and Persona Energy Sdn Bhd reached its completion through the TTAP appreciation awards and handover ceremony, held at the Ministry of International Trade and Industry (MITI), recently.
The TTAP is a unique technology transfer programme to develop local automotive talent, expertise and technology value chain through apprenticeships of selected local engineers to procure important engineering insight within endurance racing technology at the FIA World Endurance Championship (WEC).
In June this year, 4 TTAP apprentice engineers were sent to be part of the JOTA team at the 2021 FIA World Endurance Championship, to enhance automotive skills and knowledge of local talents through apprenticeships with experienced race engineers, in international racing events with professional motorsport teams.
Throughout the programme, the apprentices are considered as team members, and were given real-time engineering responsibilities on certain segments of vehicle development for each race. These responsibilities include collection and analysis of the performance of race car components, design and layout of workshop equipment and tools during races, repair and maintenance of race cars, and other engineering activities that are required during the development and race day.
An important aspect of TTAP is the collection of vehicle data during the six legs of races throughout the WEC, which provides important information from high performance vehicles that can be utilised in the development of future vehicles and components. This data includes durability, performance, and many other forms of information that can be used in engineering analysis of future vehicle technology including autonomous and electric vehicles.
As technology in motorsports are far more advanced than that in the manufacturing line, such information procured through the TTAP program will bring a new dimension to the development of the automotive dan mobility sector, either at the vehicle assembly level, or component manufacturer.
At the WEC, the JOTA team clinched a 1-2 finish in the 8 Hours at Portimao leg in Portugal, and achieved a podium finish in every race in the WEC.
PIKAS (Program Imunisasi Industri COVID-19 Kerjasama Awam-Swasta), the public-private partnership immunisation program for employees in the manufacturing sector, has been helping speed up vaccination of the Malaysian population. The large workforces of both Malaysian carmakers – Perodua and Proton – as well as those in businesses associated with them have receive vaccinations over the past weeks.
Proton reports that, following the second round of vaccinations last week, over 86% of its 8,486 employees are now fully vaccinated for protection against COVID-19 infection. The number is expected to increase over the coming weeks as 98% have already received their first dose, in line with the company’s aim to achieve herd immunity in its chain of operations.
As with the first round of vaccinations, the sports complex at the company’s Tanjung Malim plant in Perak was repurposed as an industry vaccine dispensing centre, catering for staff and vendors in the area, while those based in Shah Alam went to the Shah Alam Convention Centre in Selangor.
“PROTON is pleased to announce our PIKAS vaccination programme has been a resounding success. There are more than 60,000 people in our business ecosystem, including staff from vendors and dealers, so we are thankful to MITI, MOSTI and the Ministry of Health for their guidance to coordinate such a mammoth task and ensuring everyone registered on MySejahtera has been given the vaccine,” said Dr Li Chunrong, CEO of Proton.
80% already received one dose
“We estimate more than 80% of our operations chain would have received at least one dose of the vaccine by the end of August and this helps to ensure Proton is able to hit the ground running once the automotive industry is given the greenlight to resume operations nationwide,” he added.
To prepare for resumption of business activities, the carmaker has relooked at its business procedures to reduce the likelihood of infections being spread. Procedures at retail operations have been further tightened to protect customers and staff alike while production processes at all the plants have been scrutinised for any possible risk of infection to both downstream and upstream operations.
“Proton is committed to helping Malaysia lower the number of COVID-19 infections to quickly achieve the milestones in the National Recovery Plan. We have created new processes in all areas, from our production lines to our corporate offices, ensuring a new and safer work environment. It also means strict new rules will be enforced throughout the company and measures such as virtual meetings and splitting work between home and the office will be the norm for the near future,” Dr. Li said.
Perodua employees and suppliers vaccinated
At Perodua too, PIKAS has been used to organise a vaccination exercise for the employees and suppliers. Some 13,000 Perodua employees and suppliers have received the first dose of the vaccine at the Perodua Vaccination Centre since the end of July.
The vaccination facility is within the Perodua manufacturing complex in Sg. Choh, Selangor. Besides maintaining a high level of hygienic cleanliness by daily sanitization, there are also strict security checks at the main entrance to control movements so that there is no crowding.
Perodua’s initiative will not only prepare its workforce for the time when operations are allowed to resume but also contribute to ensuring protection against COVID-19 infection for a large proportion of the people in the Hulu Selangor district where the carmaker’s headquarters and factories are located.
Government policies for the automotive industry are not new and go back to the mid-1960s when the first one started off the domestic auto industry as part of the young country’s shift towards industrialization. Recognised as one of the industries that had been a catalyst for economic and industrial and economic growth in America, Japan and Germany, the early policies created a framework for the industry and the business which would continue to this day, promoting local production.
The first policies were aimed at encouraging foreign carmakers – there were no Malaysian ones then – to assemble locally and incentives were offered. Besides preferential import duties that would enable locally-assembled models (completely knocked-down or CKD in the industry language) to be sold at lower prices than those imported completely built-up (CBU) from factories in other countries, there was also a push to promote the development of ancillary industries such as the components industry.
This saw the imposition of Mandatory Deletion for a certain number of items (around 20) such as paint, tyres, batteries, wire harnesses, windscreen glass, etc for which foreign companies had set up factories in Malaysia. To encourage this, a penalty tax of up to 3% (rising in 2% increments each year) was imposed on companies that did not include at least 8% of content made in Malaysia as at February 1968.
The basic policies for the auto industry were maintained until the 1990s when globalization made protectionist policies less acceptable. As a signatory (and founding member) of the World Trade Organization (WTO), Malaysia had to meet certain obligations with regards to fair trading practices although a grace period was given.
Among these agreements was the Trade Related Investment Measures (TRIMS) pact signed in 1994 which forbids measures by a government that require particular levels of local procurement (use of locally-made parts or local content) by any company or which restrict the volume or value of imports a business can purchase or use to an amount related (an example being the requirement to have an import permit which is not issued freely to all bonafide applicants).
Then there was also the ASEAN Free Trade Area (AFTA) which was formed. This was an attempt to create a big single market like the earlier European Economic Community (EEC) so that there would be greater attraction to investors as there was the potential of 500 million consumers.
Privileges such as duty-free exchange of goods and services between ASEAN countries were offered so that companies could set up production hubs and export around the region, achieving better economies of scale to lower production costs.
These developments impacted the somewhat insular Malaysian auto industry which had enjoyed protection in various ways since 1967. By 2002, the local content requirement was abolished and likewise the control of pricing (of CKD models) by the government also ended and market forces determined prices. Nevertheless, some protectionist elements were still retained although the NAPs have tried to moderate them.
The National Automotive Policy (NAP) provides a ‘road-map’ for participants in the Malaysian auto industry to do forward-planning, taking into consideration the fact that such planning often covers a time-frame of 5 to 10 years. It indicates the direction to be taken and the incentives available which matter a lot to those who consider investments running into the hundreds of millions.
The original NAP was not warmly welcomed as it was seen to be protectionist. Its failure to attract foreign carmakers (or even raise their investments) was acknowledged by the MITI minister then. While protecting domestic industry is in the ‘national interest’, there needs to be a balance if Malaysia wants to be the regional automotive hub it has long aspired to be.
Like the 2-year delay for the announcement of the previous NAP in 2014, the 2020 NAP was also delayed some time. Officially, MITI minister Datuk Ignatius Darell Leiking said that it had not been ‘delayed’ but was being ‘fine-tuned’. Anyway, the latest NAP has finally been launched today by the Prime Minister and it is the fourth one to be formulated since 2006.
NAP Number 4
The new NAP has been formulated with a more global view and a National Automotive Vision to guide the country to become a regional leader in manufacturing, engineering, technology and sustainable development. The overall expectation of what this forward-looking NAP can achieve is more R&D for new technologies, creation of business and job opportunities, and the development of new manufacturing processes and value chains within the local automotive and overall mobility sector.
Actually, the new NAP can be considered an enhancement of the previous one, facilitating the required revolution and optimal integration of the local automotive industry into regional and global industry networks.
The new policy is expected to be used until 2030 and in its framework, there are three directional thrusts which will focus on development of the Next Generation Vehicle (NxGV), Mobility as a Service (MaaS), and Industrial Revolution 4.0 (IR 4.0). There are also three strategies which are Value Chain Development, Human Capital Development, and Safety, Environment & Consumerism.
Just as old geographical maps used to be quite general in presentation and today’s digital maps can zoom right down to a house location, the NAP has no less than 4 detailed National Roadmaps that provide information and guidance, as well as another 3 National Blueprints that will serve as guiding principles and reference in implementing the measures and strategies of NAP 2020.
The objectives of the previous NAP continue and these include developing a competitive and capable domestic automotive industry as well as making Malaysia a regional automotive hub in Energy Efficient Vehicles (EEVs). There has always been a desire to increase exports of vehicles, but cost-competitiveness is challenging because the factories here do not have economies of scale to challenge the big ones in Thailand and Indonesia.
However, automotive components, spare parts and related products in the manufacturing and aftermarket sector have a better chance of being export-oriented and many Malaysian companies have already gained supply contracts overseas. Some of them even supply to companies in Japan, where high quality is expected.
EEV and NxGV
The EEV initiative began with the previous NAP and promoted the development of R&D capabilities for right-hand drive vehicles and related technologies, such as fuel efficiency, light materials, telematics, tooling and component design. NAP 2020 will continue this program with a review and revision of EEV standards, and will also include commercial vehicles and motorcycles above 250 cc.
NxGV is classified as a vehicle that meets the definition of future EEV classifications and is enhanced with Intelligent Mobility applications. NxGV vehicle technology has 5 levels and the minimum will be of Level 3 Vehicle Automation, ie Conditional Automation. So rather than being a new ‘vehicle type’, it appears to be essentially a more advanced EEV (which many of today’s models already qualify as).
By next year, standards for the NxGV will be announced to ensure safety requirements and protocols for high precision systems and processes, particularly electric vehicles (EVs). The aim is to have NxGV standards for all vehicles by 2025 so commercialization can proceed.
The National Automotive Vision
Unlike previous NAPs, the new one includes a National Automotive Vision which explains what the government wants to achieve so that efforts can be focused appropriately. The main aim is to make Malaysia a hub for exports of vehicles, exports of components and spare parts, automotive R&D, development of automotive and mobility-related technologies, and vehicle and component testing.
This vision, to be realized by NAP 2020, is aimed at promoting local manufacturing activities in vehicles and components which will reduce imports of vehicles and components as well as spare parts. At the same time, it also aims to implement the transformation of the automotive sector to enhance local engineering capabilities which in turn will create opportunities in the services sector for R&D, testing and technology development activities.
Mobility as a Service (MaaS)
MaaS is a concept to integrate various types of services and transport modes into an efficient and centralized mobility service. It provides a wide range of transportation options such as a combination of public transport services and private vehicles, besides enabling users to enjoy other services such as optimized product delivery services, online health diagnostics and others.
The Multimodal Transport system will be complemented by e-payment, telematics and connected living. As innovative new mobility services become available, MaaS will evolve to adopt them, ultimately benefiting the traveler and the environment, especially in urban areas. It will also create a new ecosystem that will strengthen and improve the automotive industry.
The technology thrust includes UAVs (like drones) and Air Mobility (the flying car?) which can be part of connected mobility in future. Specific measures call for coordination and development of regulations before mass utilization.
Industrial Revolution 4.0 (IR4.0)
IR4.0 refers to the application of digital technology beyond the technological elements under Industry4WRD. The use of IR4.0-related technology applications especially AI, Big Data Analytics and IoT (Internet of Things) will enable the implementation of NxGV and MaaS.
Digital technology came with the advent of the computer age in the 1970s and has become an integral element in the auto industry. IR 4.0 represents the digital transformation of the industry based on the adoption of new technologies for the progressive automation of the production process.
The key enabling technologies such as additive manufacturing, collaborative robotics, production planning tools, Artificial Intelligence, virtual reality, gamification, process simulation, operational intelligence, IoT, and Big Data Analytics requires a system that operates and manages information and infrastructures towards creating a connected mobility ecosystem.
The enabling technologies will soon drive the industry towards envisioning a connected and integrated environment, a system of vehicle-to-vehicle communications, cameras, variety of sensors (Radar, LIDAR, RFID, etc.) and other devices integrated with advanced algorithms that can monitor the road in a variety of road, weather and traffic conditions to enable autonomous systems.
Attracting investments, expanding the market
The NAP is intended to attract investments in order to meet its targets. As has been the case since the 1960s, there will be incentives which include more competitive investment opportunities, including a more comprehensive mechanism for Customized Incentives and assistance to facilitate business operations.
While ‘customized incentives’ sounds very investor-friendly, it also makes some companies uncomfortable when only criteria are made public. This was already apparent with the previous NAP where incentives were not totally transparent as interested investors were invited to have private meetings with the relevant agencies to discuss what they could offer and what could be given in return.
Global players especially (the ones which can make big investments) have felt this ‘back door’ approach does not make for fair negotiations as they do not know what another party may actually get. They point to countries like Thailand and Indonesia which make incentives clear, open and applicable to all parties who want to ‘play’. It could well be the reason Malaysia is not a high priority when it comes to considering investments in the auto industry and commonising incentives for all may be a better way.
With its limited market size, Malaysian businesses will clearly have to look beyond our borders to continue growing. The introduction of the elements of technology and services in NAP 2020 will create both the MaaS and IR4.0 ecosystems that will provide opportunities to expand access to international markets.
Malaysia has signed a number of Free Trade Agreements with different countries to help in export programmes and these will be further utilized. NAP 2020 also encourages the expansion of soft loans to promote new export areas such as NxGV, MaaS and IR4.0 related services, besides encouraging the use of eCommerce platforms to market products domestically and overseas.
Attention to safety and the environment
With increased concerns about climate change and reducing accidents, NAP 2020 also makes sure that there is attention given to new, more environmentally-friendly elements of technologies that will address the issue of pollution. One objective is to reduce carbon dioxide emissions from vehicles by improving the fuel economy level in Malaysia to 5.3 Lge/100 kms (Lge refers to Litres of gasoline equivalent) by 2025 in line with the ASEAN Fuel Economy Roadmap of for the transport sector.
Besides the move to B20 diesel yesterday and the planned move to B30 by 2025, the NAP also mentions that petrol specifications will go from the current Euro4M for both RON95 and RON97 to Euro5 by September 2025. That’s the sort of information which the industry welcomes as planning can be done to use more advanced and environment-friendly engines that require fuel of higher quality.
Focussing on the safety of vehicles and consumers will include consumerism elements to protect consumer rights related to spare parts and services. Long-overdue matters such as compulsory inspections for all types of vehicles will also be considered and there will be more R&D on motorcycle safety. Eventually, there is to be a proper testing facility to carry out inspections on vehicles that are submitted for Type Approval.
Bumiputera participation and APs
Recognising that the auto business had limited Bumiputera participation, the government introduced the Approved Permit (AP) system in 1970 to help Bumiputera businessmen enter the sector. The idea was for them to be able to import motor vehicles and start businesses which could grow and increase their presence in the industry.
NAP 2020 will continue with the support to Bumiputeras wanting to get into the automotive sector through participation in the supply chain and other new business activities. The controversial system, supposed to end on a few occasions, will also continue to provide opportunities to qualified Bumiputera automotive entrepreneurs to be involved in importation of used cars and motorcycles.
The fee for one AP is maintained at RM10,000 for one unit of car approved under the Open AP system. This rate is applicable for the first 35,000 units for all Open AP companies under the validity period of AP provision of the current year. The fee for the subsequent approved AP unit is RM20,000 for each vehicle unit imported by Open AP companies.
The New Open AP Policy also requires that the company granted with the AP must provide buyers with at least a 1-year warranty and maintenance service or in cooperation with the manufacturer for the maintenance service.
The Franchise AP Policy is also continued for the purpose of monitoring and data collection. This policy will be implemented in line with the improvements proposed for the automotive industry as a whole, by promoting and opening greater opportunities for participation of Bumiputeras in the automotive supply chain and not only focusing on being an importer.
New Malaysian Vehicle Project
Since last year, there has been talk of a third national car project and this project is incorporated in the NAP 2020. As it is of great interest to the public, we will provide insights in a separate article. The purpose of the new Malaysian Vehicle Project, which will develop 2 cars and 1 motorcycle, is in line with the future direction and strategies of the Malaysian automotive industry and helps to fulfil the National Automotive Vision. [Click here to read more about the New Malaysian Vehicle Project]
Targets by 2030
So what is expected to be achieved by 2030? NAP 2020 has many targets to aim for (as shown in the charts below). Some targets are compared to NAP 2014 but with different values; for instance, the target for exports by 2020 was 250,000 units (which is not reached) but by 2030, the target is set at RM12.3 billion. This is, of course, based on current values and who knows how things will change by the end of the decade.
Then there’s the Total Industry Volume (TIV) which refers to sales of new vehicles in the country – 1.22 million units by 2030. NAP 2014 had set a target of 1 million units in one year by 2020 but that was a rather ambitious number. Last year, the TIV was just over 600,000 units and the Malaysian Automotive Association, in consultation with the car manufacturers, has forecast growth of only 1% or 2% a year for the next 5 years.
The same over-optimism seems to be in production volumes although this could well get boosted if exports do grow rapidly or manufacturers begin to include Malaysia in their future investment/expansion plans as a means of having additional backup locations in the event of disruptions caused by floods, earthquakes or epidemics (as we are now witnessing). NAP 2014 had set an annual production volume of 1.35 million units by 2020 but last year, the total volume from 22 plants was around 570,000 units.
Exports of components has much potential and where NAP 2014 set a target of RM10 billion, the aim is to reach RM28.3 billion in export value by 2030. This is an area where Malaysia could work towards becoming a regional hub since it is harder to be a hub for vehicles when the big factories in neighbouring countries already have high volumes. And with the emphasis on developing technologies that are more advanced in many fields, there could be an inclination for global suppliers to set up bases here. Of course, it still depends on incentives offered which must be attractive enough against other countries.
Also, the stability of policies must be assured and this seems to be promised with the ‘lifespan’ of this NAP set to cover the period up till 2020. A sufficiently long period gives investors more comfort in forward planning. But what some companies fear is while the policies may be maintained for 10 years, incentives might change since they are not openly stated and therefore can be varied at anytime for anyone.
Another National Car? I would have thought that the term is no longer of significance today and that the more important thing is the branding of a product by a Malaysian company as a ‘Malaysian Car’. This would be in the same way as we refer to a Toyota as a Japanese car, a Mercedes-Benz as a German car and a Peugeot as a French car. There’s no need to emphasise ‘national’ since by now, the majority of the new car’s development can already be by Malaysians. We have built up an enormous amount of expertise in automotive engineering, unlike the early 1980s when there wasn’t even such a field in local universities to train Malaysians.
I’m referring to the ‘hot news’ of the day which is the announcement by MITI of a ‘New National Car’ (NNC) to be launched within 2 years. A company known as DreamEDGE (which most Malaysians would not have heard of before) has been appointed as the ‘anchor company’ for the project. That many outside the auto industry may not have heard of DreamEDGE could be because much of the work it does would have been confidential, for clients in the industry. It is a 12-year old company and has manufacturing and prototyping expertise with facilities in Cyberjaya, Bukit Jalil, Taiping as well as Japan.
Daihatsu Motor involved
Curiously, like Proton and Perodua, the development of this NNC will have assistance from Daihatsu Motor (although it is not clear if it will be a shareholder). The Japanese carmaker already has a long and strong partnership with Perodua and has provided guidance over the years to bring the Malaysian carmaker to a very high level of competence and capability. Its expertise in compact cars has been shared with Perodua which today has the ability to do a lot of development work on new models itself.
That Daihatsu is in the picture poses the question of what the role of DreamEDGE will really be. After all, didn’t a former CEO of Proton 19 years ago declare that the carmaker – and therefore the country – had the capability to develop, design, engineer and build a car from scratch? The dependence on foreign carmakers was deemed unnecessary and Proton had even sent home all the engineers from Mitsubishi Motors, its partner.
Perodua labelled a ‘cloner’
That Proton could ‘do it all’ by itself suggested that Perodua, which chose a course of close collaboration with Daihatsu, was a ‘cloner’, not doing much to advance the Malaysian auto industry. Malaysians were told that Perodua was merely being given models to copy rather than actually learning anything for themselves. So it wasn’t a ‘Malaysian car company’.
But don’t get me wrong – I really am not criticizing the matter of having a foreign partner in the project. That’s how it’s done in the industry today and all the global players have collaborated with each other to develop new models at various times. The costs involved are massive and to develop a good product, joint efforts make better sense; there’s no loss of face doing it this way.
Proton’s tie-up with Geely, after having squandered the opportunity to be part of the Volkswagen Group 12 years ago, shows how having a partner – and a strong one at that – is far better than trying to go it alone just to prove a point about independence. With support and guidance from a group which has a premium brand like Volvo, Proton is now gaining the expertise that it could have acquired much earlier than Perodua and it is on the ascent.
‘National’ – a good and bad term
Using ‘National’ for this project serves is not going to necessarily to win support from the public, as the first Malaysian National Car did in 1985. It may draw criticism (but so did the original National Car project) although there is assurance that this time round, funding will not come from the government… perhaps not directly.
But being a Malaysian company that will give us another National Car, DreamEDGE will certainly qualify for different types of grants and incentives from the government. These can run to millions and of course, that could mean money drawn from other more important development projects around the country. From what I understand, Malaysia is still having billions of debt to settle so isn’t supporting a project like a NNC an extravagance?
Over the years, it has often been said that the government should not be involved in business. It should be developing a healthy environment for businesses to grow and manage regulations for orderly development. But it got into the car-making business with Proton and as the ‘brand owner’ for decades, it naturally used all its power to ensure that its own business would not fail. That’s not necessarily a healthy way to do business as it doesn’t toughen up the company. It is often said that a company which has gone through hard times will emerge stronger. But for Proton, with the government as owner and backer, tough times were softened with injection of money and sometimes policies affecting the rest of the industry.
‘National’ can also be a double-edged sword, as it was for Proton. It suggests that this business has the backing of the government and how many companies can compete against the government? It suggests a protected business and that again can be good and bad where foreign investors are concerned. Speaking to top executives in global car companies over the years, I have often been told that the reason why they don’t invest more in Malaysia is not just that the market is not particularly big but also because it has a ‘national’ car business so the playing field is not level. They would rather invest in Thailand or Indonesia where there is no ‘national’ interest for the government to give an advantage to.
So calling this new project ‘National’ will create the same situation again. If things get too challenging and funding is inadequate, the rationale for the government offering financial assistance will be that it is a ‘national project’, one which is in the country’s interests.
Of course, I could also be wrong and the business model with Daihatsu participating could well be a good one, with an outcome like what Perodua has had. In fact, from one of the slides shown during the announcement, it appears that the activities planned are identical to those which Daihatsu used for the development of Perodua. Things like Upper Body Design, for example, were taught to Malaysians in Japan and since the development of the first Myvi 15 years back, their expertise in this area has grown to the point where Daihatsu has now recruited a small group to participate in its global projects.
Objectives of original National Car project achieved
There are many who criticize Tun. Dr. Mahathir Mohamad for wanting to have a national car again. Infuriated by what he perceives as the foreign ‘takeover’ of the Malaysian car company he created and never accepting Perodua as a truly Malaysian carmaker, he wants to try again. I can understand that but he already has the legacy of being the ‘Father of the Malaysian Car’ and no one will ever erase that.
Furthermore, his objective of having a National Car project in the 1980s as a catalyst towards industrialization was also achieved. Perhaps we have not grown to become economic powerhouses like Japan and Germany which were largely helped by their auto industries after World War II but the Malaysian auto industry has made plenty of progress since 1985. The situation which Proton went through should not be the measure of success or failure of the original project as it was just one element.
The other thing which I noticed about this NNC project is that the scope is broad and covers the areas which are vital to be in today (and tomorrow). Clearly, the models to come will be ‘electrified’ (hybrid powertrains with electric motors as well as all-electric models) but I think the fuel cell vehicles (FCVs) mentioned are a bit too ambitious! Apart from the fact that only a handful of companies have achieved limited commercialization of FCVs, there is the big question of hydrogen refueling stations. As it is, getting a sufficiently extensive recharging network for plug-in hybrids and the coming electric car models is still challenging.
Time-frame and strictness needed
I’m prepared to keep an open mind on this NNC project except that, like many, I just hope it is run as a proper business and not become another ‘Ministry of Car Making’. If the government is involved, its role should be one that is at arm’s length and there won’t be the ‘close one eye’ mentality.
I also think that DreamEDGE should be given a strict time-frame to deliver. All along, one of the things which I felt Proton lacked was the pressure of a deadline to get in shape for true competition. Unlike Perodua which knew AFTA (the ASEAN Free Trade Area allowing duty-free exchange goods) was coming when it was established, Proton seemed to carry on like the Malaysian market would remain protected for it so being ready was not a priority.
Not surprisingly, details of the NNC are few although we’ve been told that we will see a mock-up by the end of August (Merdeka Day, I bet). The first prototype is expected in March 2020 and the production model will be in showrooms in March 2021. That is a very, very short time-frame by industry standards. So it is almost certain that the first model will be an adaptation of an existing one from Daihatsu (or even the Toyota Motor Group which Daihatsu is part of). That is the only way I can see a new car being developed so fast and it saves a lot of money too.
What happens to Perodua?
And what happens to Perodua in future? It has essentially ‘graduated’ after a long period of training by Daihatsu. Its production level has reached the sort of volume where it is truly a mass producer and to sustain its business, it will have to be much more serious about exports. Daihatsu will probably assist in this and in the longer term, Perodua could be Malaysia’s brand for the world markets. The NNC could spend a couple of decades as a domestic brand while Proton could be a regional brand, as Geely seems to have planned.
There’s also the matter of building the cars and then selling them. It is not as easy as it seems, as those in the industry will tell you. Nothing has been said about this part and it may be a good idea to draw on the experience of either Perodua or Proton. Daihatsu, being involved, may recommend Perodua of course and Geely might not be comfortable with Proton having an association with a competitor. But then again, the people who have been promoting the NNC are likely to also have their own associates who are eager to get into the business.
One thing for sure is that the automotive landscape has changed a lot since the 1980s. Competition in the industry has intensified so much that even the bigger players had to consolidate, starting with the mega-merger of Daimler and Chrysler. Today, it’s all about groups of companies sharing resources and looking at the auto industry as a wider business than just making and selling cars.
Note: The views and comments of the author are strictly his own and not necessarily shared by PISTON.MY. Readers are encouraged to post their own views and start a healthy discussion on this topic.