High-tech approach to becoming an automotive hub in Asean
16 Jul 2024
Malaysia should focus on making energy-efficient vehicles and parts and components, says analyst
THE focus on producing energy-efficient vehicles, including electric vehicles (EV), together with parts and components, could give Malaysia a push to become an automotive hub in Asean, an industry analyst said.
This requires more high-tech components for production, hence it is not labour intensive.
Simultaneously, Malaysia should start focusing more on research and development (R&D).
“Malaysia used to be at the forefront of the industry but Thailand has surpassed us by developing more vendors for the crucial parts,” independent automotive analyst Hezeri Samsuri said.
“Tyre companies have built regional R&D facilities in Thailand. We are still ahead of Indonesia but we should be prepared for its growing appetite for automotive. We need to see what the industry requires. For the time being, we can see that Chinese companies are making inroads into Asean.”
He said with labour cost higher than its neighbours, Malaysia needs to focus on high-tech components for EVs, among others.
“There is no shortcut to this,” Hezeri told ‘Business Times’.
In June, Geely chairman Li Shufu said the competitiveness of Malaysia’s automotive industry was being restricted by its automotive supply chain, whose costs were 30 per cent higher than China’s and 10 per cent costlier than Thailand’s.
Hezeri said assembling cars for export to Asean markets is no longer an option because every country wants to have its own completely knocked down factories.
“Hence if we focus on EV components, we can export the parts and, later, technology to these countries. Australia is a good example where they have shut down their car factories and turned the country into an R&D centre for Asia-Pacific car companies.”
He said the talent that the nation has grown, thanks to Proton and Perodua, should not be wasted.
The challenge the country faces is focusing too much on domestic sales.
“With a small market, we do not have the volume to make local assembly plants ‘sexy’ anymore. We are also not really heavy into R&D, and with EV technology being so new, investment in R&D will be rewarding in the future.”
Hezeri added that more should be done to turn Malaysia into an automotive R&D hub in Asean.
“For example, Proton’s old test track facility should be turned into an R&D facility for any car brand to use.
“Battery tech for Asean climate and usage should be looked into further. In fact, we should push Asean to ‘protect’ the market by making it compulsory for certain EV components to be produced here.”
He said Asean must protect its market by compelling foreign car brands to use local tech or components if they want to get incentives.
Malaysia should start focusing more on R&D or else its talent would be driven away.
“Perodua has been working to develop products for Toyota and Proton’s engineers have moved out from Malaysia as their talent is no longer required here. Our engineers are scattered all over the world when we should be using them to develop our country,” said Hezeri.
AmInvestment Research said EVs made up 2.6 per cent of Malaysia’s new vehicle sales in the first four months this year, up marginally from 1.7 per cent in 2023.
Although Malaysia offers generous incentives and tax holidays to EV buyers until the end of 2025, these benefits are primarily accessible to affluent consumers due to the minimum price of RM100,000 for an EV.
“Essentially, Malaysia’s EV policy encourages affluent consumers as early adopters, and for the main
stream market to catch on.
“This strategy, also used in North America and Europe, has yielded unfavourable outcomes as EV sales declined once the incentives expired,” it said, adding that Malaysia will face a similar situation in 2026.
According to AmInvestment Research, Malaysia should consider adopting policies like China’s, which is the most successful large-scale adopter of EVs where it focuses first on lower-income individuals.
The firm, quoting China Association of Automotive Manufacturers, said China banned internal combustion engine motorbikes and mandated electrified two-wheelers in 2017, resulting in over 350 million e-scooters zipping across the country in 2023.
It added that diesel public buses were phased out and replaced with electric versions at the same time, and now 80 per cent of public buses are electrified nationwide.
“As a result of these policies, the average Chinese commuter has become familiar with the EV and its merits. Air quality has improved significantly and cities have become noticeably quieter,” it said.
AmInvestment Research said China’s EV sales in May accounted for 43.5 per cent of total vehicle sales, a significant increase from about seven per cent in January 2021 before the incentives for private EVs were introduced.
The firm said the policies clearly worked, which is no small achievement given that it is the biggest car market globally and the third largest country in terms of geographical size.
Source: NST
