Malaysia on right track to be EV power house

 Geely and Tesla..and conducive ecosystem provide support

KUALA LUMPUR: Malaysia is on the right path to become an electric vehicle (EV) powerhouse in South-East Asia with the government aggressively promoting a conducive EV ecosystem, supported by strong business commitment shown by two world-renowned automotive companies, Geely and Tesla.

Malaysian Automotive Association (MAA) president Mohd Shamsor Mohd Zain said the entry of China’s Zhejiang Geely Holding Group Co, or simply Geely, and United States-headquartered Tesla Inc into the Malaysian market serves as a clear indication of the country’s relevance in the regional automotive landscape.

He said the two auto makers, with their vast global experience and access to leading technologies, could introduce new ideas and ways of doing businesses to the local automotive sector, such as high-tech research and development (R&D) in new products that might not be currently available in the country.

“For example, electrification means a change in vehicle components, with more focus given to battery manufacturing and other specialised components for EVs.“We would also see the industry adopting new skillsets and infrastructure suited to varying degrees of electrification – from mild hybrids to fully electric vehicles – besides reskilling or upskilling the automotive workforce, whilst opening up new opportunities for innovation, R&D and high-value manufacturing of components,” he told Bernama.

He added that with the right government support, infrastructure and policies in place, Malaysia is well positioned to be a regional hub supporting the global growth of EVs given its strategic positioning and favourable economic conditions.

Malaysia is a major electrical and electronics manufacturing hub in South-East Asia; therefore, he said, automakers and automotive investors can seamlessly leverage on this capacity to secure their supply chains for growing their production of next-generation vehicles.

The components sub-sector can be capitalised on to service the whole automotive value chain, covering semiconductors, sensors, automotive electronics, transceivers, batteries, and vehicle assembly.

Mohd Shamsor said with more than 40 brands in the domestic market currently, the entry of new players would undoubtedly add greater excitement to the market and generate more interest among consumers.

Besides, it would also create a buyer’s market by providing more choices and increasing competitiveness, keeping all automotive players on their toes and resulting in better services and offerings for consumers.

“Malaysia may be new to the EV industry, but with the solid support of the current government and progressive national policies coupled with fast-growing consumer uptake, we foresee rapid holistic growth in our local EV market.

“New players in the EV space will lead to greater competition, which in turn will spur more investments from automotive players and improvements in the quality of products and services offered,” he pointed out.

Additionally, Mohd Shamsor said, with more EVs, including the completely knocked down models, coming into the country, there would also be new business opportunities for the vendors.

Meanwhile, Icats University College pro vice-chancellor Prof Datuk Dr Shazali Abu Mansor said EV is still considered as a niche market for the domestic automotive landscape, and that strong demand and supply are equally important for the industry to penetrate the Malaysian market at a meaningful rate.

He said as Malaysia manages its competitive advantages according to world standards, major adjustments in the structure of employment, tax, and subsidy allocation are inevitable in the journey towards creating critical mass.

“In some prominent EV countries, carbon tax is implemented to encourage both consumers and manufacturers to shift towards more environment-friendly vehicles.

“Malaysia used to be an agriculture and commodity-based country, but now the economy boasts robust manufacturing and service sectors, and is going to be a high-tech nation by 2030.

“We must move on and make way for new changes,” he reckoned.

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Honda Malaysia leads the way

IT has been a good year for Honda Malaysia as its sales figures from January to November has steadily increased to 69,150 units


This is a 34% increase compared to the brand’s total sales of 51,550 units last year..

In fact, Honda Malaysia claims that it is now the market leader in the non-national passenger car market, taking away the title from UMW Toyota.

According to Akkbar Danial, general manager for Honda Malaysia and also the company’s head of marketing, Honda Malaysia is well on track to hit its 2014 target, which is 76,000 units.

“The tsunami and earthquake in 2011 disrupted our production and parts supply but we restructured our business operation and devised a threeyear plan to achieve a high volume sales in Malaysia,” says Akkbar.

He adds that the main strategy is to offer affordable products that give buyers value for money in order to be competitive in the Malaysian market.

“We achieved this by increasing the localisation of our parts and the result is the current City and Jazz, which both carry competitive prices with added features.”

The other approach was a re-look into its operations and as a result, Honda Malaysia has expanded its production with the new No.2 Line at its Pagoh plant in Malacca.

This has increased its production capacity from 50,000 units to 100,000 units a year.

In the same period, Honda Malaysia also looked into increasing efficiency in its factory and expanded its pre-delivery inspection process and parts warehousing.

“Finally, to accommodate the high volume of sales, we have also expanded our dealer network from 62 dealers in 2012 to 78 dealers this year. This is to ensure that our customers are more satisfied. We plan to have a dealer in all major towns in Malaysia,” explains Akkbar.

Currently, its best selling model is the City, which has sold 32,465 units from January to November this year. Honda has also introduced variants that cater to all budgets.

The Jazz for example, has three variants and prices start at RM72,800 and go up to RM87,800. The City has four variants and its prices start at RM75,800 with the highest variant priced at RM90,800.

Such a wide range of prices offer options to the consumers, which translate to more offerings and higher sales.

Honda Malaysia has 11 models in its list and this includes three hybrid models - the Civic Hybrid (RM185,500), CR-Z (RM183,000) and the Jazz Hybrid (RM89,912). The latter is assembled locally and enjoys the hybrid benefits introduced by the government.

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Is Proton seen headed in the right direction? 

Is Proton seen headed in the right direction?

Proton has been trailling fellow national carmaker Perodua since 2006 in terms of sales

THE recent announcement by automotive conglomerate DRB-Hicom Bhd that it plans to raise RM2bil in funds, mostly to help turn around wholly-owned carmaker Proton Holdings Bhd, is seen as a move in the right direction by many.

One industry observer points out that Proton needs to develop new technology to help keep it competitive.

“For any automotive company to survive and be competitive, it needs to develop new technology on a continuous and consistent basis.

“Unfortunately, this has been a challenge for Proton.”

Proton’s lack of economies of scale is a major issue for the car company, he says.

“The pricing of its vehicles can be more competitive. However, this is not the case as the company can’t bring down the unit price of its vehicles as its development costs are spread across a smaller number of units, unlike many of its foreign competitors.”

Proton has been trailing fellow national carmaker Perusahaan Otomobil Kedua Sdn Bhd (Perodua) since 2006 in terms of sales.

While Proton has been struggling over the years sorting out issues such as its sales performance, quality issues and after sales woes, among others, Perodua meanwhile has been steadily thriving.

In 2005, Perodua, which was still behind Proton in terms of sales, launched its iconic Myvi compact car, a model that changed the automotive landscape and turned the tides in favour of Perodua.

The Perodua Myvi has been the best-selling car in Malaysia for eight consecutive years from 2006 and 2013. The model accounts for about 50% of Perodua’s annual sales.

According to data by the Malaysian Automotive Association, Proton sold a total of 138,753 vehicles in 2013 compared with 196,071 vehicles sold by Perodua in the same year.

Recently, Proton launched the highly anticipated Iriz, which, to many, is considered a game-changer for the company and is regarded as “the car” to protect its market share and directly take on the Myvi.

An automotive analyst points out that added funds are necessary for Proton to come up with not only new technology, but new competitive models as well.

“DRB-Hicom reportedly spent RM500mil to develop the Iriz and the car has been very well received by the public. Therefore, Proton needs more such models to boost sales and grow its marketshare, which is what justifies the need for added funds,” he says.

Earlier this month, DRB-Hicom announced that it was launching a perpetual sukuk programme to raise funds of up to RM2bil, which Malaysian Rating Corp Bhd (MARC) expects will be channelled to Proton.

The rating firm has assigned a preliminary rating of AIS to the group’s proposed perpetual Sukuk Musharakah programme of up to RM2bil. It also affirmed its AA-IS rating on DRB-Hicom’s existing Islamic medium term notes (IMTN) programme of up to RM1.8bil.

Both ratings carry a stable outlook. The two-notch rating differential between the perpetual sukuk and IMTN is in line with MARC’s notching principles on hybrid securities.

The proposed perpetual sukuk is non-callable within five years of issuance and has profit distributions that are cumulative and deferrable on an unlimited timeline.

MARC says the affirmed rating on the IMTN incorporated DRB-Hicom group’s strong market position in the domestic automotive industry, underpinned by a diverse range of car marques and a long operational track record.

It adds that the rating was also supported by a moderately diversified revenue stream from other businesses that included concessions, logistics and property development.

However, MARC has pointed out the ratings are constrained by the group’s large borrowings and its continued reliance on external funding to accommodate expansion and acquisition plans.

An analyst says the sukuk is unlikely to adversely impact DRB-Hicom’s credit profile.

“DRB-Hicom’s debts jumped in 2012 when it acquired Proton.

“Nevertheless, we believe that the sukuk is not designed to place pressure on their earnings.”

MARC, meanwhile, says that Proton’s short term liquidity concerns had eased somewhat following the completion of subsidiary Lotus Group International Ltd’s (Lotus) £207.30mil (RM1.1bil) debt restructuring into a longer tenured debt.

RHB Research Institute director and head of research Alexander Chia says Proton pays a high amount of finance cost per year to pay-off the borrowings it took to acquire Proton in 2012. “DRB-Hicom borrowed RM3bil to buy Proton and is currently paying over RM300mil in finance costs annually, which is a huge chunk of group profits. Proton’s marginal contribution to earnings is not helping matters.

“DRB-Hicom’s balance sheet is over-leveraged and Proton is also not contributing to help boost their earnings,” he says.

According to DRB-Hicom’s financial report for the financial year ended March 31, 2014, its finance cost stood at RM292.38mil.

Alternatively, another analyst says it is vital for Proton to collaborate with a globally-established original equipment manufacturer to enhance its competitiveness.

“A strategic partner can help fasttrack Proton’s presence in the global automotive arena. It also needs to be able to expand its export market.

He notes that tying up with a partner can also help Proton to reduce its costs.

It was reported recently that Proton and Honda Motor Co Ltd are currently engaged in a series of meetings to explore the possibility of collaborating in the field of technology enhancement, new product lines and sharing of platform and facilities.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed has commented that this venture is expected to help Proton save millions in investment and development time for a new model.

According to MARC, Proton’s debt level rose by 24.1% year-on-year to RM1.79bil, which led to an increase in the car manufacturer’s debt-to-equity (DE) ratio to 0.58 times for financial year ended March 31, 2014 (FY14) (FY13: 0.38 times).

BY EUGENE MAHALINGAM The Star/Asia News Network

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Women driving car market growth

Women seek foreign brand cars for style, performance and confidence boost.

 SEOUL: After years of driving Korean cars, Chung Ji-eun, a 33-year-old businesswoman, recently purchased a Benz C-Class sedan for herself.

“I used to enjoy shopping for European designers’ bags or shoes. But the satisfaction level with the Benz was the highest,” she said.

“I like the luxury design and performance. But, above all, I feel more confident driving alongside the tough male drivers on the road.”

The number of female drivers has surged in Korea since 2000. By the end of 2011, female drivers made up 29.5% of the nation’s drivers, up from 19% 10 years ago.

With their number growing recently, female drivers are expanding their presence in the local car market, especially the market for import car brands that are seeing soaring popularity.

For Korea’s largest car maker Hyundai Motor, 25% of customers are women. At the same time, the figure for import cars is 40% on average.

Hyundai, which claims about 40% of the domestic car market, said it is very difficult to figure out the exact number of female customers in Korea since many of them buy cars in the name of their husband or father.

Thus far, compact cars with cute styles such as Nissan’s Cube and BMW’s Mini have been favoured by female drivers here.

“For all Nissan cars, the male-female ratio is about 6:4. But for the pastel-coloured Cube, the figure is nearly 5:5,” said a Nissan Korea spokesperson.

“I feel the preference of females has become a more important factor in choosing cars (to sell) here.”
According to BMW Korea, the biggest selling foreign brand in Korea, 40% of their customers are also female.

A rising trend is the moderate growth in the number of women choosing sport utility vehicles in recent years, a BMW Korea PR official said.

“The age of our drivers is getting younger and the rate is more aggressive.

“And the number of female SUV drivers is increasing 2% to 3% every year nowadays,” he said.

Of the total BMW SUV drivers, female drivers accounted for 26% in 2011, up from 21% in 2009 and 24% in 2010.

Drivers say import cars are easier for women to drive as most of them are high-performance, luxury vehicles. Of course, the nation’s never-abating appetite for luxury goods may have also affected the growing trend.

Roh Hyun-jung, 50, drives the BMW 5-Series sedan that she bought two years ago on the recommendation of her husband, who still drives a Korean car.

“Driving a BMW requires a middle-aged woman like me to spend less energy. The luxurious interior design was also another reason for choosing the car,” she said.

Kim Jeon-kyu, who teaches at a local driver’s training institute, gave an interesting perspective based on a driving culture unique to Korea.

“I sometimes recommend my female students to buy an import car,” he said.

“Female drivers, especially those who have just started driving, are highly likely to be bullied by tough male drivers here. But if you drive a luxury car, they would just avoid you because they are well aware of the high maintenance costs.”

Korea Herald By Lee Ji-Yoon , AsianNewsNetwork

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