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Is the Third National Car Project a Japanese plot to keep on top?

POSTED BY Yamin Vong ON 13 August 2019

#yamin

What do you think about the new national car project?

 

It’s a plot to maintain the dominance of the Japan auto industry and to prevent a take-over like what the South Koreans did to Japan’s white goods industry.

It will also keep Malaysia’s automotive industry in the dark ages of import substitution while Thailand races ahead with automotive exports.

And a Daihatsu car platform will be provided free of charge? Nothing is free in the competitive automotive world but consider: Japan learnt a bitter lesson in the 2000’s when South Korea’s LG and Samsung washing machines and TV’s rapidly overtook Japan’s Panasonic, Sharp, Toshiba, Sony etc.

Japan’s automotive industry is not going to let what happened in the white goods industry without a fight to maintain its dominance. How long can the Japan automotive industry keep Asean as their exclusive market?

To give a Daihatsu car platform and government incentives to a new car maker will suppress the newly resurgent Proton and threaten its ambition of being the first carmaker in Malaysia to achieve significant exports to Asean member countries.

Anyway, the Third National Car Project led by DreamEdge as announced last week by the Minister of International Trade and Industry, Dato’ Darell Leiking will not be a car project the way Proton was.

I think the new Proton took the title of the Third National Car two years ago when Proton’s owner, DRB-Hicom accepted a minority partnership bid by Zhejiang Geely Holdings Group (ZGH), a Fortune 500 company and China’s largest privately-owned automotive company.

The new Proton is rapidly turning around and its Geely-derived X-70, the face-lifted Persona, Iriz, Saga and other marketing strategies led it to register seven consecutive months of growth this year bringing its market share to second place for the first half of the year.

So, for me, we already have a new national car maker, Proton and now I can really believe that Malaysia has a viable path to achieve its vision of being an automotive hub for the Asean region.

If the purpose is to have a Third National Car to create high value employment and export earnings, then the best thing is to fairly distribute all fiscal incentives to existing car companies in Malaysia, and not just to government anointed champions such as DreamEDGE. Similarly too, an earlier proponent to make a Third National Car project, Alam Perkasa and its Mimco Alif electric vehicle. This is where we should be concerned. When the government gives incentives to a nominated company, it is already playing favourites and choosing champions. What will the other car companies who are invested in Malaysia think about this.

We’ve learnt many lessons from Proton, lessons which are even more valid today:

  1. We don’t have the market size and the economies of scale like Thailand (70 million), Indonesia (320 million) and Vietnam (100 million). To overcome the R&D costs of building a model from scratch, Perodua successfully adapted Daihatsu’s existing models for the Malaysia market.
  2. Proton is following the profitable business model – take a successful car platform from its partner and adapt it for the Malaysia market and subsequently, the regional markets.
  3. What Proton will do better is that its ZGH partner will want to export Proton cars to Asean markets, right hand drive as well as left hand drive.

I think the narrative about Malaysia’s automotive industry is clear. Malaysia is dominated by foreign car makers who are invested in Malaysia to secure a captive domestic market and with singular exceptions, they are not exporting in significant quantities.

Clearly, Proton and its China partner, Zhejiang Geely would like to take market shares in Asean member countries because they have practically no sales presence in Thailand, Indonesia and Vietnam. On the other hand, it’s certain that China-owned SAIC in Thailand wants to export its Roewe to Malaysia

  1. We can learn something from Proton’s history where it was successful because the government made sure that competitor’s cars were more expensive by a variety of incentives, R&D subsidies and favourable tax treatments.
  2. Global automotive players are focusing on Plug in hybrid vehicles and battery electric vehicles as the next steps forward. On this note, if Alam Perkasa or DreamEDGE had a strong foundation like Proton, they would do better to partner with another China car disruptor such as BYD or any of the top 15 Chinese brand passenger cars in the following order: SAIC, Geely, Great Wall, Changan, Chery, Dongfeng, BYD, BAIC, GAC, Zotye, JAC, FAW, Brilliance, Hawtai Motor and Liebao Motors.

If we see our situation, the major global automotive players are already invested in Malaysia and the government can do many more things to grow the nation as a hub for the new mobility industry.

For instance, the road tax structure should be modernised to tax carbon emissions rather than engine size.

And perhaps we should give incentives to manufacturers who assemble and manufacture battery packs for electric vehicles. Tesla is building Giga battery factories in the USA, Europe and China. An industry observer, Urs Mueller, believes that Malaysia still has a chance in the EV industry making batteries for the traction motors.