The Malaysian Car Industry

I am amazed at the number of people who thought that ALL cars would get cheaper after the implementation of AFTA. (for those who didn’t know, AFTA stands for the ASEAN Free Trade Area). They were disappointed when 1st of January, 2005 came and went and car prices didn’t go down (in fact they went up). They were disappointed that they still were not able to afford their dream Mercs, BMW, Hondas and Toyotas.

For those who didn’t know, under the terms of the Common Effective Preferential Tariff (CEPT) Agreement, Malaysia initially agreed to put the tariffs for automotive parts to below the five percent level by 2003. The move was postponed to the year 2005, when the car industry was badly affected by the economic crisis in 1997/98.

However, I am surprised to find that so many people are ignorant of the fact that this applies only to foreign companies having manufacturing plants in ASEAN with local content of at least 40 percent in order to enjoy the preferential import duty. So luxury brands like BMWs, Mercedes Benz, Lexus, Ferrari and Porsche (as well as other makes) manufactured outside the ASEAN region will not be cheaper. Import duties on those cars still remain. Anyway, people who can afford to buy these cars will buy these cars. Even without the taxes, they are still above the RM100K mark. I still can’t afford to buy a car costing over RM80K anyway. How many of you can?

Then some people ask how come new Proton and Perodua cars are not cheaper. I disagree. They are cheaper. The new cars have better quality, extra features (like air bags, ABS) and service has improved. So for almost the same prices we are getting a better overall package.

Some people say that the Government should remove the taxes all together on all cars.

The logic is simple. Cars become cheapr and we can all afford the foreign brand that we have all been dreaming about. Yes!It would mean the end of the Malaysian automobile industry. Who cares about the consequences. Some people couldn’t care less but let us try to answer some questions:

- How many vendors companies have been developed and depend on Proton and Perodua for their survival?
- How many people are employed by these companies?
- Are you aware that the taxes obtained from the import of foreign cars into Malaysia are used for supporting public facilities?

Selling to a foreign car company may mean killing the Proton brand, loss of jobs and of course money moving away to other countries.

Of course there is always the question, "How come Korean cars are so cheap?" Why can't Proton be like them?

I simply have no good explanation. Proton and Perodua have to find the answers if they are to survive and remain competitive. Maybe I can blame it on dumping – that is, the practice of selling goods in foreign markets at significantly lower prices than either in the home market of in other markets. Many companies do this in order to build up their market share. The Japanese did it in the US. Proton does it too – for example, cars sold in UK are reportedly cheaper than in Malaysia or have better specs.

However, having said that I feel that the Malaysian companies have to find out how the Korean (and now the Chinese) car companies have been able to come up with winning designs and even penetrate the tough US market (which Proton and Perodua hasn’t been able to do so far).

Proton CEO's Contract Not Renewed

The board of directors of Proton Holdings Bhd group has announced yesterday that it will not renew CEO Tengku Tan Sri Mahaleel Tengku Ariff's contract. He will retire on Sept. 30 and goes on leave from today.

Mahaleel joined Proton in 1996 and was appointed CEO on April 1, 1997. I guess this announcement was expected as the differences between the CEO and the Board had been well publicized.

Despite the complaints and criticisms against him. it should be noted that, Proton moved from being only an assembler to a full fledged manufacturer of cars during his tenure. He made it into one of the most profitable companies in Malaysia.

Some people may argue that this was due to the fact that it had been supported/ protected by the government but several other companies, which received the same support/ protection were not that successful.

An four member interim executive committee (exco) has been established to assume the responsibility of the group CEO from today, pending the appointment of a new chief executive officer.
The exco comprises of:
-Datuk Mohammed Azlan Hashim (Proton Holdings chairman)
-Badrul Feisal Abdul Rahim (Proton board director)
-Datuk Kisai Rahmat (Proton’s director of operations )
-Datuk Kamarulzaman Darus (CEO of Proton Tanjung Malim Sdn Bhd)

The later two were named as joint chief operating officers (COOs),

Newspaper Reports:

- Star

- NST

Related Posts:

- Tengku Mahaleel in Trouble

Mitsubishi Motors back in Malaysia

Mitsubishi Motors is back in Malaysia after a gap of 20 years. It withdraw sales from the market after it became Proton partner.

EON Auto Mart Sdn. Bhd., a unit of EON will sell the entire range of Mitsubishi passenger cars and light commercial vehicles in Malaysia besides takign care of the after sales support.

Mitsubishi Motors Malaysia Sdn. Bhd. the joint venture company between Edaran Otomobil Nasional Bhd (EON) and the Mitsubishi Corporation of Japan (48:52), was established in March.

According to their chief executive officer, Fumihiko they are targeting to sell 400 to 500 units of vehicles for its six newly launched models.

The car models with their prices (On the road with insurance and roadtax, West Malaysia)are given below:


-Mitsubishi Lancer (1584 cc): RM102,309.50


-Mitsubishi Colt (1499 cc): RM121,953.50


-Mitsubishi Grandis (2378 cc): RM211,218.20


-Mitsubishi Lancer Evo IX (1997 cc): RM284,363.90

-Mitsubishi Outlander (2378 cc): RM187,520.20

-Mitsubishi Storm Double Cab (2477 cc): RM87,998.20

The AP Issue

The issue of Approved Permit (AP) saga was first raised up by Tun Dr. Mathir Mohamad, former PM of Malaysia and now Proton's advisor.

On the 18th of July, the Malaysian Government released the list of Approved Permit (AP) Click here ...

Also read:

The Star report

The NST report

I never thought we would see this day. The Prime Minister Dato' Seri Abdullah Bin Haji Ahmad Badawi proves that he is willing to take action.

Today Datuk Seri Rafidah Aziz says the "AP Kings" deserved the permits .
Read here

Suzuki APV

Been too busy to update this blog.

Suzuki Automobiles Sdn Bhd, the official distributor of Suzuki vehiles in Malaysia recently launched the Suzuki APV. It is made in Indonesia but I don't think that customers would be put off by that.

The design is somewhat boxy (like the Proton Juara) but not unattractive.

This eight seater is powered by a 1.6 litre fuel injected, 16 valve engine.

Pricing (on-the-road, without insurance):
* Manual - RM59,888
* Automatic - RM69,888

For more information go to Paul Tan's blog.

Jumbuck Popular Down Under

Sometimes you find out that consumers in different countries have different tastes. Relating to cars, the Mitsubishi Town Box was quite popular in Japan but the Proton Juara (based on the Town Box) was a total failure in Malaysia.

Launched in 2003, the Proton Arena two seater pick-up or utility vehicles is Proton's first entry into the light commercial vehicle market. Criticism upon criticism was heaped upon it when it first came out in Malaysia and sales are still negligible here. "A wira with the back cut off," my friends used to call it. However, in Australia it is a different story. The Jumbuck as the Arena is known here, has seen sales up 57 percent for the first six months of 2005 compared with the same period last year. According to Proton Cars Australia managing director, John Startari, the Jumbuck "is the foundation stone for the future growth of Proton in Australia...".

Read Aussie reviews here and here..
BTW, Jumbuck is sheep in Aussie slang.

Naza to Assemble Peugeot Car

Naza Corporation Sdn Bhd revealed in a statement on June 29, wednesday that it had signed a memorandum of understanding (MoU) with France's Peugeot S.A. to assemble a local variant of the 206 model under the Naza brand.

They are not only for the domestic market, but also for export in the growing right-hand drive ASEAN market.

According to the statement, production of the car should start early 2006 at Naza's plant in Gurun, Kedah.

Cycle and Carriage Automobiles have been appointed to provide the after-sales support.

Currently NAza manufacturesthe Naza Ria and the Naza Citra in its plant in Gurun.

Read the reports in the Edgedaily and in Forbes.

Tengku Mahaleel in Trouble

Looks like Proton's Chief Executive Tengku Tan Sri Mahaleel Tengku Ariff is in trouble after he criticized the government's auto policy in an interview with the Oriental Daily (Chinese language) newspaper on Tuesday.

However, its hard for me to understand his complaints about the "poor treatment" Proton was receiving from the government. Everyone knows that Proton couldn't have come this far without the Govt's support and after all the government owns 42.74% of Proton through Khazanah Nasional Bhd and is its biggest shareholder.

The Prime Minister Datuk Seri Abdullah Ahmad Badawi has denied rumours that Khazanah Nasional Bhd had asked Proton Holdings Bhd's board to remove the latter's chief executive officer. Read the Bernama report.

The company’s board of directors had called an emergency meeting and have given him until the weekend to explain his comments. Read the NST report.