PETALING JAYA: The National Automotive Policy (NAP) 2012, which is to be announced in the early part of this year, could see further liberalisation, or the “unfreezing” of manufacturing licences for cars with engine capacity below 1.8 litres and priced below RM150,000, according to a report released by Affin Investment Bank Bhd yesterday.
Affin’s information is based on a meeting with the Malaysian Automotive Institute (MAI), a think tank under the Ministry of International Trade and Industry, to promote foreign direct investments (FDI) for the automotive sector in Malaysia.
According to Affin, the policy change, a complete 180-degree turnaround from its previous policy in 2009, which “froze” licences for the manufacturing of passenger cars in the segment, will potentially open up Malaysia’s automotive sector to more players from China, India and South Korea to set up their production plants here to serve the growing Southeast Asian car market, said a market observer.
However, analysts contacted by The Edge Financial Daily were sceptical that the government would completely overhaul the policy, stating there remains a great concern on the future of local car companies Proton Holdings Bhd and Perusahaan Otomobil Kedua Sdn Bhd (Perodua), if the market for affordable passenger cars is completely liberated.
“It is not time yet for the government to liberalise the passenger car market as Proton is still not healthy,” said Ahmad Maghfur Usman, an analyst with OSK Investment Bank Bhd, who covers the automotive sector.
“It is such a waste if the government leaves Proton to disappear from the industry after decades of hard work and billions of ringgit spent to ensure the national automotive company survives. Recently, Proton announced a plan to boost its exports to larger markets such as China and India so that the carmaker does not only depend on the domestic market alone.
“Let’s just give Proton the last push for it to become competitive in the domestic and international automotive markets,” Maghfur added.
He said the government had recently approached consultants from the automotive industry in Thailand for advice on how Malaysia can attract more FDI into the sector.
The consultants seemed to touch on environmental-friendly hybrid vehicles.
According to Maghfur, the 2012 NAP will likely focus on making Malaysia a hub for hybrid or electric car manufacturing.
He pointed out that the tax exemption provision for hybrid cars would end in 2013, when Proton launches its homegrown hybrid cars. Thus, buyers will have to pay the full price with excise duty if they are to purchase the hybrids from 2013 onwards.
The report by Affin Investment also said MAI expected the NAP to touch on green manufacturing hubs involving hybrid car assembly, electrical parts and battery, incentives for auto parts suppliers to move up the value chain and help them to achieve greater economies of scale via the set-up of an export hub.
“The regulators will also introduce new safety regulations as a form of non-tariff barrier for the domestic automotive industry. Safety standards and testing requirements will be tightened thereon. These non-tariff barriers are intended to protect Proton and to a lesser extent Perodua and the existing local assemblers from the potential threat of low-cost manufacturers from China and India,” the report stated.
Affin Investment said the potential policy changes in NAP will likely benefit auto parts suppliers and manufacturers the most as the government wants to make Malaysia a hub for auto parts production in the region.
An investment banker said the auto parts sector would grow with the entry of new players with the potential “unfreezing” of manufacturing licences.
“We may see not only the entry of new players from China and India (dominated largely by Tata) but also from South Korea through Kia, which has a minimal presence in the Asean region.
“We note that APM Automotive Holdings Bhd is already upgrading its skill sets to move up the value chain. The auto manufacturing outfit under UMW Holdings Bhd and MBM Resources Bhd will also benefit,” the report added.
The “unfreezing” of manufacturing licences may also see new partnership opportunities for some local parties such as Warisan TC Holdings Bhd, Tan Chong Motor Holdings Bhd and Berjaya Corp Bhd.
A more competitive landscape will be negative for Proton and to a lesser extent, Perodua, which currently enjoys attractive product price-points and R&D grants.
This article appeared in The Edge Financial Daily, January 13, 2012.
There are no comments yet