Unlocking Malaysia’s global automotive potential
26 Feb 2024
Entries by international EV companies signal a significant move towards EV transition, and longstanding local players also play pivotal roles
Malaysia’s automotive sector is embarking on its next revolutionary phase with the introduction of electric vehicles (EVs).
EV companies such as Tesla Inc and BYD Auto Co Ltd entered Malaysia’s market with a big statement towards the transition, aligning with a mission to champion the cause for environmental sustainability.
Noma SWO Consult associate partner and Gerson Lehrman Group’s (GLG) council member Nik Zafri Abdul Majid, alongside Proton Holdings Bhd deputy CEO Roslan Abdullah, shared perspectives on recent partnerships, government initiatives and Malaysia’s position in the global shift towards EVs.
Nik Zafri emphasised the pivotal roles of longstanding industry players, highlighting DRB-Hicom Bhd’s position through Proton.
“DRB-Hicom has been a long-standing player, in which Proton is the branding and monument for its success,” he told The Malaysian Reserve (TMR).
He said the collaboration with international brands like Suzuki, Honda and Mitsubishi has propelled DRB-Hicom to a leadership position in domestic production.
“Most importantly, the car parts are imported and (then) assembled locally (complete knock-down [CKD]) which promotes domestic production, job creation and vendor development,” he said.
He also believed that broad experience, domestic production, job creation and vendor development are four key elements of how DRB-Hicom influenced the market trends, making it more competitive with appealing local vehicles.
UMW Holdings Bhd, synonymous with Toyota, offers diversified options to consumers.
“The influence of UMW on consumer choices and market trends are diversified options and established international brands,” he added.
Nik Zafri also noted that Tesla’s entry into Malaysia signals a significant milestone in the government’s push towards Sustainable Development Goals (SDGs), particularly in the EV domain.
“Tesla’s presence with EVs raises awareness and interest, which may influence the future direction of market trends, where the plan is to establish supercharger networks and service centres, which will boost the EV ecosystem,” he said.
Strategic Initiatives and Partnerships
Proton’s collaboration with DRB-Hicom and Zhejiang Geely Holding Group Co Ltd, as shared by Roslan, plays a crucial role in shaping Malaysia’s automotive trajectory.
Proton has recently made progress with the development of the Automotive High-Tech Valley (AHTV) project in Tanjung Malim, Perak.
“The project is a major initiative which is expected to energise the Malaysian automotive industry and attract RM32 billion in investments over the next 10 years, while creating job opportunities and helping Malaysia become a regional leader in the production of next-generation vehicles (NxGVs),” Roslan told TMR.
He also said that Proton’s transition into battery electric vehicles (BEVs) positioned the company at the forefront of Malaysia’s EV revolution, gaining valuable insights and contributing to the digital transformation journey associated with EVs.
“Proton started its BEV journey with the introduction of the smart model, distributed through its subsidiary, Proton New Energy Technology Sdn Bhd (Pro-Net), in 2023,” he said.
In regards to AHTV, Nik Zafri resonated with Roslan’s statement, adding that it will boost domestic production.
“We can expect transfer of technology in the future which will encourage the localisation of EV technology and components, hence reducing imports,” he said.
DRB-Hicom’s partnership with Geely further emphasises Malaysia’s commitment to boosting domestic production, localising technology and fostering a sustain- able automotive ecosystem.
“As at the end of 2023, the company has introduced 31 models and cumulatively sold 4.98 million units, so we are approaching another milestone in 2024,” said Roslan.
Meanwhile, Nik Zafri said the Malaysian Investment Development Authority’s (MIDA) collaboration with Perusahaan Otomobil Kedua Sdn Bhd (Perodua) would lead to the launching of the MIDA-Perodua Digital Transformation Ecosystem Programme.
“The aim is to upgrade the local automotive suppliers with state-of-the-art technologies and advanced machinery, digitising manufacturing processes (upgrade of the prevailing material requirements planning [MRP]/enterprise resource planning [ERP] system) and for a more affordable vendor development programme for Perodua,” he noted.
Investments in research and development (R&D), coupled with digitisation efforts, underscore the industry’s dedication to modernisation and innovation.
NAP2020 and Tax Initiatives
Government initiatives and incentives, crucial catalysts for growth, play a vital role in Malaysia’s automotive sector.
The government’s launch of the National Automotive Policy 2020 (NAP2020) was aimed at enhancing Malaysia’s automotive industry in the era of digital industrial transformation.
The goal is to cultivate the NxGV technology ecosystem to position Malaysia as a regional hub for NxGV production, enhancing the involvement of the domestic automotive industry in the sector. This initiative not only emphasises technology advancement but also encompasses the overall transport ecosystem.
The policy aimed to modernise the domestic automotive industry in line with the Industrial Revolution 4.0 (IR4.0) and ensure that consumers, domestic industry and the government benefit from NxGV implementation.
Furthermore, the policy was also aimed to reduce carbon emissions from vehicles by improving the fuel economy level in Malaysia by 2025 in line with the Asean Fuel Economy Roadmap of 5.3 litres of gasoline equivalent (Lge)/100km.
Concerning fuel economy level, it was reported in October 2023 that Malaysia’s refined fuel consumption is projected to grow at a much slower pace than anticipated over the next 10 years, averaging at around 1.5% from 2023 to 2032.
Hence, it is a good time for Malaysia to transition towards the government’s Environmental, Social and Governance (ESG) goals with the usage of EVs, and the development of Kulim Hi-Tech Park in the northern region of Malaysia.
Nik Zafri said the commitment to attracting investments, promoting technological advancement via grants and funding programmes, developing infrastructure, foster- ing workforce competencies, encouraging localisation and supporting vendor development created an enabling environment for industry players to thrive.
For example, tax exemptions offered by the government, such as investment tax allowances and pioneer status, would attract more foreign direct investors (FDI) into the automotive industry.
It will reduce the initial investment costs for companies, making Malaysia a more attractive destination for establishing or expanding their manufacturing operations.
“For individuals, income tax relief of up to RM2,500 on EV charger rental, purchase, and installation; and for companies, this applies to the tax deductions on EV rental, in which both of these incentives will be extended until 2027,” he said.
Training More Skilled Workers
Nik Zafri also touched upon the government’s initiative to introduce the National Dual Training System (NDTS).
“Initiatives like NDTS combine classroom learning with on-the-job training, providing graduates with practical experience and improving their employability in the automotive sector,” he said.
Subsequently, Investment, Trade and Industry (MITI) Minister Tengku Datuk Seri Zafrul Abdul Aziz said during his speech at a recent BYD launching ceremony that MITI would collaborate with other ministries to fulfil the industry’s demands.
“MITI will continue to collaborate with the Human Resource, Education and Higher Education Ministries to ensure that the industry’s requirements for skilled workers will be fulfilled,” he said.
Last year, MITI set up the National EV Steering Committee, which is a Cabinet committee comprising key ministries to address top concerns in the industry.
“This 400% increase in BEV adoption signifies our strong policy push that has generated a strong trend in the shift from internal combustion engine (ICE) to EV among Malaysian consumers,” Tengku Zafrul added while complimenting BYD for achieving the highest number of units of EV cars brought into Malaysia.
Meanwhile, Roslan said Proton’s alignment with government aspirations and its focus on connectivity, autonomous, shared mobility and electrification (CASE) technologies echoed this commitment.
He also noted the government’s active participation in the promotion of EVs, which aligned with the Net-zero Carbon Mobility blueprint.
“The government must make the policies clear to the public to address the various concerns regarding the usage of EV cars such as range anxiety, financing facilities, as well as the second-hand value of EV cars,” he said.
Malaysia’s Position in the EV Revolution
Nik Zafri said although Malaysia is still in the early stages of the EV revolution, there is significant potential for growth.
Challenges such as limited EV production and infrastructure gaps exist, but strong government support through initiatives like tax breaks and subsidies signals a promising future for EV adoption and production.
With these challenges, he said Malaysia is likely to face tough competition for at least one to two years, given the head start in EV development and production enjoyed by countries like China and South Korea.
However, he was hopeful about Malaysia’s trajectory in its EV development.
“Partnerships and investments with Geely and Tesla can bring in expertise and technology, accelerating Malaysia’s EV development,” he said.
Nik Zafri believed that leveraging expertise, partnerships and financial support, Malaysia, including Proton, is poised to emerge as a key player in the regional EV market by 2025.
As for Roslan, he supported the government’s targets towards transitioning to EVs, notably achieving 15% EV of new car sales by 2030.
“Proton views these targets to be in line with the ICE-to-EV transition period as it may require some time to convince consumers and stabilise the industry,” he noted.
However, he said that ICE and hybrid EV (HEV) cars are expected to prevail until 2030, followed by the decline of volumes for ICE vehicles.
Source: The Malaysian Reserve
