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Saturday, August 07, 2010

ARTICLE: NAP yet to draw major investments from abroad

The Star Business, Saturday August 7, 2010
NAP yet to draw major investments from abroad

THE revised National Automotive Policy (NAP) has not been a blazing success as initially hoped by the Government, as it has yet to attract any significant foreign investments to Malaysia.

“If the question relates to getting global motor vehicle manufacturers to set up new production bases in Malaysia, then it is true that up to now there has been no announcement by global players on such a move,” says Malaysian Automotive Association president Datuk Aishah Ahmad.

Aishah, however, adds that there are several factors investors need to take into consideration before making any investment decisions.

“Whether to set up a base in Malaysia is a business decision which depends on a host of other factors,” Aishah tells StarBizWeek in an e-mail response.

An industry observer who requested anonymity says it is not difficult to see why the automotive industry has not attracted in-flow of investments.

An analyst says industry liberalisation so far has been more focused on the luxury segment, so Proton and Perodua are still protected.

“Everyone out there is only interested to bring in CBU (completely-built-up) units into Malaysia because we are still an attractive passenger car market,” he says.

“With most foreign automotive companies already setting up bases in Thailand and making it their regional hub, it is hard to imagine why anyone would want to uproot to relocate or worst still, to add fresh capacity via a new plant in Malaysia.”

Under the NAP which was reviewed last year, the country’s automotive industry was further liberalised to see a more effective development of the industry.

Among the measures introduced by the Government was to issue manufacturing licence to foreigners for selected segments without imposing any equity condition beginning this year.

This was offered for the production of luxury passenger vehicles with engine capacity of 1,800cc and above, pick-up trucks and commercial vehicles, hybrid and electric vehicles, as well as motorcycles of 200cc and above.

In early March, it was reported that the Government had received “overwhelming response” from foreign luxury car manufacturers seeking further clarification on the NAP.

“The Government has acknowledged that the local automotive industry needs to improve its capabilities and competitiveness to survive in the long term,” says Aishah.

“Local players are encouraged to look beyond the domestic market and to explore partnerships with foreign automakers in penetrating the global markets,” she adds.

Aishah says Malaysian companies should convince their principals on the attractiveness of this form of partnership.

“For non-national makes, this would depend very much on their principals to make such a move,’’ she says.

Nevertheless, the liberalisation of the local automotive industry seems to have kick-started some initiatives.

UMW Toyota Motor Sdn Bhd has announced it plan to invest RM170mil over the next three years to further develop its assembly plant in Shah Alam.

The company also plans to assemble its Toyota Camry model in Malaysia for the local market, replacing the current Thailand-imported units from 2012.

France’s Peugeot has announced its plan to make Malaysia a production hub for right-hand-drive vehicles.

Under a memorandum of understanding between local distributor Nasim Sdn Bhd and Automobiles Peugeot last month, a C-Segment sedan – about the size of Honda Civic or Toyota Altis – is expected to be launched next year.

The car, to be powered by either a 1.6-litre turbo-charged or 2.0-litre engine, will be assembled at Naza’s plant in Gurun, Kedah.

An analyst with a local bank-backed brokerage says the Malaysian automotive industry will not be “completely liberalised” as long as there are excise duties in place.

“Liberalisation of the industry so far has been more focused on the luxury segment, so Proton and Perodua are still protected. Only if excise duties are reduced, then will the NAP have a positive impact.

“If more foreign automakers come in with lower car prices, then it’s good. But so far, none has set up their lines here.”



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