EP Manufacturing makes bold EV venture
20 May 2024
Manufacturing expertise built over 40 years instilled confidence in GWM and BAIC to collaborate
AUTOMOTIVE manufacturer, EP Manufacturing Bhd, was on the lookout for new business ventures when its attention turned to electric vehicles (EV) and energy-efficient vehicle (EEV) manufacturing business. In a short period, it became a key area for the company to diversify its operations.
Group CEO Ahmad Razlan Mohamed said after conducting feasibility studies, it was determined that this area is a promising business venture for its car assembly business.
How did this come about? Ahmad Razlan explained the journey in a recent interview with The Malaysian Reserve (TMR).
Listed in 1997, EP Manufacturing is an industrial group that supplies modular assemblies, safety and critical components to major carmakers. The group aims to become a leading automotive player in Malaysia’s EV market but is also not shy to venture into other businesses such as tourism.
The company recognised that automotive parts component manufacturing is a challenging industry, and it was not alone in facing this pressure.
“We sought to diversify into areas closely related to our traditional business. This led us to enter the car assembly industry. During our business development efforts, Great Wall Motor Co Ltd (GWM) approached us with an interest in collaborating on car assembly. Together, we conducted feasibility studies and planning,” said Ahmad Razlan.
GWM is a Chinese privately owned automobile manufacturer headquartered in Baoding, Hebei. Founded in 1984, it is currently the eighth-largest automobile manufacturer in China.
“At the same time, during our visit to China, as we were exploring various business opportunities and researching the car assembly industry, Beijing Automotive Group Co Ltd (BAIC) approached us with a keen interest in collaboration,” he added.
BAIC is one of China’s largest carmakers and a Fortune Global 500 company.
“I believe our reputation in the market, built over 40 years of experience, instilled confidence in them (Great Wall Motor and BAIC) regarding our manufacturing expertise. We mutually agreed to pursue this business opportunity,” explained Ahmad Razlan, who assumed the role of EP Manufacturing group CEO on March 20, 2023.
Previously, he spent almost seven years as a director for corporate advisory at Prokhas Sdn Bhd, a company owned by the Ministry of Finance (MOF). Prokhas was established to oversee the residual assets of Pengurusan Danaharta Nasional Bhd following its closure in December 2005.
However, EP Manufacturing encountered some challenges, including the need for significant capital investment. The new business also demanded quality assurance of the machines and equipment as well as obtaining regulatory clearances from the government.
On July 11, 2023, it managed to secure from the Ministry of Investment, Trade and Industry (MITI) a manufacturing license to manufacture and assemble four-wheeled EEVs, EVs and electric commercial vehicles.
Then, on Oct 18, 2023, the group signed a memorandum of understanding (MoU) with BAIC International Development Co Ltd and Great Wall Motor Sales Malaysia Sdn Bhd (GWM Malaysia) to enable the local production of sport utility vehicles (SUV), internal combustion engine (ICE) vehicles and EVs.
Partnerships
In January, EP Manufacturing announced that its subsidiary, PEPS-JV (Melaka) Sdn Bhd (PJVM), will serve as the contract vehicle assembler for the Malaysian unit of China’s GWM for the next eight years. EP Manufacturing’s focus will be on assembling and producing GWM’s Haval H6 and Haval Jolion SUV models.
The assembly activities will take place at the Melaka facility, aiming for an annual output of 20,000 units by 2028. Additionally, the facility will cater to the production of BAIC vehicles.
In April, EP Manufacturing announced its partnership with BAIC to assemble and manufacture BAIC’s authorised model vehicles in Malaysia. Its wholly owned subsidiary, PJVM, had finalised an agreement with BAIC.
Under the terms of the 10-year agreement, PJVM will be responsible for assembling and manufacturing the vehicles in Malaysia, with a targeted capacity of at least 5,000 vehicles per year by Sept 1, ramping up to 10,000 vehicles annually by March 1 of the following year. PJVM will also handle the procurement of all necessary devices, equipment, permits or approvals for vehicle assembly and manufacturing.
In return, BAIC will authorise PJVM for assembly and manufacturing, provide technical support and training, and oversee the assembly process.
The agreement superseded a MoU signed in August 2023, focusing on developing BAIC’s BJ40P and X55II SUVs and right-hand drive EVs for Malaysia and other Southeast Asian markets.
“They (BAIC and GMW) are our clients. We have a vehicle assembly agreement with them, which stipulates what are our obligations and what are the forecasts of the cars and models that we are going to assemble for them in this country.
“We get the factory, machinery, and personnel ready. They supply us with their complete knocked-down (CKD) kits, we assemble them, and we charge certain fees for the service. We refer to it as assembly fees,” he added.
Meeting Market Demands
As a Tier-1 automotive supplier, EP Manufacturing operates five plants and factories throughout Malaysia. It provides modular assemblies, safety components and critical parts to leading car manufacturers, including Proton Holdings Bhd, Perusahaan Otomobil Kedua Sdn Bhd (Perodua), Honda Malaysia Sdn Bhd and Mazda Malay- sia Sdn Bhd. Additionally, it also serves Kia Malaysia Sdn Bhd to some extent.
In its core business, the auto parts manufacturer is anticipated to persist in delivering cost-saving advantages to industry players, particularly original equipment manufacturers (OEMs). This entails ongoing negotiation and collaboration with them.
“We have to continue focusing on managing our costs. It’s a highly competitive landscape. We need to ensure that our processes are efficient, our manufacturing practices are up-to-date, and continuously improved so that we can effectively manage our costs.
“And since industry players, especially the OEMs, expect us to provide ongoing cost reductions to them.
“It is common in this industry that after a couple of years — typically in long-term contracts — such as those with Proton or Perodua spanning five years, they expect process improvements and efficiency, leading to cost reductions. So, that’s the challenge we have to address.
“We aim to achieve revenue growth and improve our bottom line from 2024 onwards,” he said.
For the year ended Dec 31, 2023 (FY23), EP manufacturing posted a net profit of RM18.6 million on a turnover of RM648 million compared to a net profit of RM399,000 on a turnover of RM516.3 million in FY22.
Expanding Sungai Petani Plant
Concurrently, Ahmad Razlan stated that the group is exploring the expansion of its facility in Sungai Petani, Kedah, to better serve its Mazda clients.
The plant was set up by the group’s 60%-owned subsidiary, Peps Y-Tec (M) Sdn Bhd, in partnership with Y-tec Corp (a Tier-1 supplier for Mazda Japan), to produce body panels and chassis assemblies for Mazda CX5 and Mazda 3 models. Operations began in August 2016.
He believed that because the group’s main business was thriving and its clients were satisfied, there is a strong interest in expanding its factories.
Apart from its Kedah plant, the group operates two factories in Selangor, located in Batang Kali and Shah Alam, and a new factory in Melaka.
The group has also opened a two-wheeler assembly line in Shah Alam for the assembly of EV bikes under its wholly-owned subsidiary EP Blueshark Sdn Bhd. The facility boasts a production capacity of 12,000 units per year and was operational in April 2024.
EP Manufacturing announced in a filing that it will start building a new vehicle assembly plant in Melaka. The plant, set to be constructed in phases at the Hicom Pegoh Industrial Park, will receive over RM100 million in investment. Upon completion, it will have the capacity to produce up to 30,000 EEV and EV vehicles annually in its initial phase. The plant will manufacture and assemble vehicle models for BAIC and GWM.
It added that the initiatives implemented so far are part of the group’s efforts to navigate its businesses amid the global transition towards gradually phasing out internal combustion engine vehicles. These efforts are aimed at ensuring the sustainability of the group.
It plans to strengthen its core business segments and explore new market opportunities. The new CKD plant is expected to enhance the existing business by creating more opportunities for manufacturing automotive components in the future.
Exploring Sabah property market, tourism
IN 2022, EP Manufacturing had acquired property developer Kensington Development Sdn Bhd from Pacific Novel Ltd for RM45.6 million.
The company has completed three major projects in Taman Seri Pelangi, Kota Kinabalu, Sabah, with a gross development value (GDV) of over RM40 million.
These investments illustrate the group’s dedication to broadening its portfolio and strengthening its foothold in the property development sector.
“Our primary focus has consistently been automotive manufacturing. However, we also engage
in other ventures, including property development, boasting a land bank of over 13 acres (5.26ha),” said Ahmad Razlan.
However, he said demand for property in Kota Kinabalu was mixed, with some viewing an oversupply.
A report by Knight Frank Malaysia titled “Real Estate Highlights 2H23” suggested that Sabah’s housing market was predominantly buyer-oriented, with condominiums/apartments accounting for the majority of existing stock, totalling approximately 54,119 units.
During the review period, mixed-use developments’ retail components in food and beverage offerings have gained popularity.
Several notable retailers entered the Kota Kinabalu market, indicating a promising future for the state’s retail segment.
“We are currently exploring partnerships with reputable firms to ensure that our land assets can realise their full potential in terms of GDV and increase in value.
“At present, negotiations are ongoing. Our aim is to launch at least one project in Kota Kinabalu by 2024, utilising our existing land alongside a reputable partner.
“We are cautious about venturing into areas where we lack expertise, to effectively manage risks in property development. Therefore, we are likely to seek a joint venture partner to develop our land and market the resulting products,” he concluded.
While Ahmad Razlan under-represented the group’s dedication to its primary automotive manufacturing business, he also conveyed a willingness to explore opportunities for potential diversification.
Tourism is among the sectors under focus. Sabah tourism authorities are targeting three million tourist arrivals this year, an increase from 2.8 million in
2023. This revised goal stems from the state’s thriving tourism sector, which generated RM4.6 billion in receipts last year.
“We noticed that the tourism industry in Sabah is booming and it’s continued to attract a lot of attention from players, not only from Sabah itself but also from Peninsular Malaysia,” he said.
EP Manufacturing is cautious and planned to continue evaluating opportunities and conducting a proper feasibility study to ensure responsible investment.
Currently, it has not finalised any venture in Kota Kinabalu, but remained open to possibilities.
Source: The Malaysian Reserve
