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National automotive policies: Loving well, and now, love smartly

POSTED BY admin ON 19 February 2018

This is crunch time for the Minister of International Trade and Industry, Datuk Seri Mustapa Mohamad, and his cabinet colleagues, as commercial reality bites home following the year-old sale of a 49.9 per cent stake in Proton to China’s Zhejiang Geely.

Those directly affected are component makers and dealers. Some hurt more than others.

Component suppliers, called vendors in automotive speak, have been asked to reduce their prices by up to 30 per cent. The implication is not that they have been overcharging but that it could be a mix of inefficiency and disadvantageous economies of scale.

Dealers, especially those selling Proton cars from shop houses, have been asked to put in more money and at least operate from two adjoining shop-houses of which one must be a corner lot.

There has of course been an outpouring of grief and it hasn’t been helped by the brusque and business-like attitude of some members of the mainland Chinese management team.

Essentially, they have told the complainants that if they can’t stand the heat in the kitchen, don’t be a cook.

The cost cutting and the call to invest have been the lightning rod for the Bumiputera vendors and Proton dealers who have been content with merely selling cars rather than upgrading into 3S and 4S centres.

To put this into context, Carlos Ghosn and his Renault managers put the same cost cutting sword to Nissan after it acquired the Japanese car maker in 1999.

But in Japan’s case, Nissan’s component makers had economies of scale, R&D assets and money in the bank. They would have probably needed a bit of bank loans to tide them over.

We asked Thailand’s automotive component doyen, Yeap Swee Chuan, his views in conjunction with his Chinese New Year visit to his family in Malaysia:

“The global automotive industry is about economies of scale and meritocracy. Thailand makes two million vehicles a year, half of which are pick-up trucks which are exported worldwide. Almost all those pick-up trucks exported from Thailand use components from AAPICO-Hitech and our group of companies,

“Component makers have to keep investing to keep pace with the industry. Even as a small company in the global scheme of things, AAPICO invested USD100 million last year in India, Europe, USA, Mexico and China.

“We started our expansion in China 12 years ago and now we have a London office to coordinate our global operations and what we call “smart alliances”.

“Even in the new age of electrification and autonomous vehicles, EVs have 60 per cent to 70 per cent mechanical components,” he said.

“Zhejiang Geely is the most successful car company in China in terms of growth last year. So they have a track record and if they come to Malaysia and put their resources to make Proton a successful car maker, how can they not be successful in a small country like Malaysia?”

Khun Yeap as he’s fondly addressed in Bangkok where he is the long-serving chairman of the Malaysian-Thai chamber of Commerce and a director of the Thailand Board of Trade, is a Malaysian automotive component maker who found his success in Thailand after his brake components were rejected by Proton in its early days.

AAPICO-Hitech Public Limited Company is a Stock Exchange of Thailand-listed automotive component maker which supplies almost all major car makers in Thailand.

 

Yamin Vong has written about the Malaysian automotive industry and Proton since its first car was launched in 1986.

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