Issue: May 2014


Malaysian government driving auto industry transformation



by Paul Cooke




Becoming the Energy Efficient Vehicle (EEV) ASEAN hub and a reduction of the price of cars by 30% over the next five years – those are two of the main objectives of the Malaysian National Automotive Policy (NAP 2014) launched early in 2014. 

The NAP targets exports of at least 200,000 car units, with exports of components to reach a minimum value of RM10 billion (US$300 million) in 2020. It focuses on human capital development, supply chain components, spare parts and technology development. There are two measures - firstly, funding from year 2014 to 2019 to increase the competitiveness of Malaysian companies in all sectors. 

This will be followed by a continuous supervision of car manufacturers and companies operating in after-sales services to ensure effective participation of local companies in the domestic automotive industry. The framework consists of measures that will be taken by both government and industry. The NAP 2014 will see a larger base of new models being introduced in the domestic market. These models will be both greener and safer. A car price reduction framework has been developed to fulfill the promise of gradual price reduction. 
According to M. Madani Bin Sahari, chief executive officer, Malaysian Automotive Institute (MAI), the Government is constantly reviewing its fiscal position and is open to reducing excise duties when the fiscal situation permits. As an example, models such as Saga SV, Persona SV, Viva, Alza and MyVi S Series, the new Honda Jazz and Nissan Almera were introduced at reduced prices of between three and 17%. These models accounted for 30% of market share in 2013. In 2014, more new models and variants will be introduced at competitive prices Sahari says Malaysia will transform itself into a regional hub for passenger car manufacturing by encouraging more foreign car companies to invest in the country. 
It has opened its market to outside manufacturers, having scrapped a regulation that foreign manufacturers could only produce vehicles with engines of 1.8 liter capacity and larger. Malaysia believes that it is well positioned as a gateway to other markets, with preferential access through Free Trade Agreements (FTAs) as well as economic partnership and cooperation. Current FTAs include: Regional (ASEAN): AFTA, China, Japan, Korea, India and Australia-New Zealand; and Bilateral: Japan, Pakistan, Chile, India, New Zealand, Australia. Under negotiation is an EU, Trans-Pacific Partnership (TPP), and a two-way free trade agreement with Turkey. 

Encompassed in the EEV hub vision are strategies and measures to strengthen the entire value chain of the automotive industry. This will also lead to environment conservation, high-income job creation, the transfer of technology and the creation of new economic opportunities for local companies. Based on this vision, about 85% of vehicles produced in Malaysia in 2020 will be EEVs. The plan addresses the needs for skills: “Employment is one of the main contributions of the NAP 2014. About 550,000 people are directly employed in the automotive industry. 

With this policy, it is expected that 150,000 more employment opportunities will be created by 2020; while local skilled and semi-skilled workers will replace 80% of foreign workers in the automotive manufacturing sector by 2020,” says Sahari. The Malaysian automotive industry contributed RM 30 billion to the national GDP in 2013. The NAP 2014 focuses on structural issues affecting the domestic automotive industry and outlines measures to meet global quality, cost and delivery requirements. 

The policy is aligned to United Nation safety regulations of vehicles and it deals with issues affecting consumers. “There are six roadmaps and action plans developed to complement the implementation of the NAP 2014. These roadmaps also serve as guidelines for the transformation of the local automotive industry. 

They are the Malaysia Automotive Technology Roadmap (MATR); Malaysia Automotive Supply Chain Development Roadmap, Malaysia Automotive Human Capital Development Roadmap, Malaysia Automotive Remanufacturing Roadmap, Development of Automotive Authorized Treatment Facilities (ATF) Framework; and the Malaysia Automotive Bumiputera Development Roadmap,” he says. Vendor development is very important in creating a competitive automotive industry. The NAP 2014 hopes to develop a base of world-class vendors. Domestic vendors will be transformed to become global and regional level component manufacturers under the vision of NAP 2014. 

“The Government, under NAP 2014 will continue its support of the national car industry. The support includes market expansion activities, improving quality and productivity, cost- reduction and development of supply chain based on their transformation plan. Overall, the NAP 2014 provides a total financial package of about RM2 billion, as well as measures and implementation plans to realize the NAP 2014,” says Sahari. 

Automotive Industries (AI) asked Sahari what impact NAP 2014 will have on the Malaysian automotive industry. 

Sahari: The NAP 2014 is designed to transform the Malaysian automotive industry into a vibrant sector that will enhance further the industrialization of Malaysia. The automotive industry has always been an important sector, and will play a greater role with its liberalization. It is expected that by 2020 the automotive industry will contribute 10% to GDP. The NAP 2014 also focuses on making Malaysia an EEV hub in the ASEAN market. The focus on EEV sets the roadmap for the transformation of the Malaysian automotive industry into a green automotive industry. This transformation will lead to a sustainable industry, while ensuring the preservation of resources and environment. 

AI: How realistic do you think is the aim that 85% cent of vehicles produced in the country by 2020 will be EEVs? 

Sahari: It is indeed a very realistic target. The MAI has engaged with the industry players, and they are very committed to produce new models that will meet the fuel efficiency as indicated in the EEV standards. As for the new vehicle manufacturers, the manufacturing license is issued on the basis that they produce EEVs. 

AI: How will this change the profile of Malaysia in the global auto manufacturing sector? 
Sahari: We expect Malaysia will be among the key automotive players in the ASEAN region. It is expected that production volume in Malaysia will exceed 1.3 million units by 2020. Malaysia will also lead the development of green automotive-related technologies across the supply chain in the region. Malaysia is already a WP29 (UNECE World Forum for Harmonization of Vehicle Regulations) member, with whole vehicle type approval (WVTA) to be fully implemented by early 2016. It is also expected that Malaysia will champion recycling and remanufacturing in the automotive industry. We recognize the importance of ensuring a sustainable industry while meeting safety standards. 

AI: How do you see the new human resource policies under NAP 2014 impacting Malaysian auto manufacturing? 

Sahari: The new human resources policy is the key to transforming the Malaysian automotive industry. A specific roadmap to develop human capital was developed and implementation is already in progress. The roadmap has two paths – namely meeting the immediate needs of the automotive industry, and preparing for the future requirements of the industry. This important because technology is constantly evolving, while process and products are getting more innovative. The needs of human capital will also change, and therefore it is necessary to continuously adapt human resources training to the latest technology  



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