Malaysia’s automotive industry is now under the stewardship of a seasoned and respected leader in Johari Ghani.
During his inaugural visit to the Malaysian Investment Development Authority last month, Johari stressed that investment success should only be determined based on tangible economic outcomes.
Johari’s tough talk has garnered much attention from automotive industry C‑suite leaders, particularly as the sector now lies directly within his expanded investment, trade and industry portfolio.
In fact, the automotive sector now ranks as Malaysia’s second‑largest industry, after electrical and electronics (E&E).
In the context of the automotive industry, many of the investment targets are embedded in the National Automotive Policy (NAP) 2020.
This includes a total export value of RM50.6 billion by 2030, comprising completely built-up cars worth RM12.3 billion; RM28.3 billion in parts and components; and RM10 billion in remanufactured parts and components.
However, Johari can expect to face several challenges.
Outdated policy
Challenge No. 1: NAP 2020, and a draft that was intended to refresh it, are now both outdated.
The international trade and industry ministry (Miti) and its agencies have proposed a refreshed incentive programme to update the NAP 2020. However, this draft incentive policy, called the New Customised Incentive Mechanism (NCM), addresses mild hybrids while completely missing out new technologies like plug-in hybrids.
No sales data
The second challenge facing Miti is the absence of comprehensive, government‑issued monthly data on new car sales and registrations.
Currently, all monthly car sales data are provided by the Malaysian Automotive Association (MAA) but this dataset is incomplete because some car makers are not members of the association.
For instance, Bumiputera car importers are not MAA members. As a community represented by Pekema — short for Persatuan Pengimport & Peniaga Kenderaan Melayu Malaysia — they account for about 50,000 cars a year.
Miti should coordinate with the transport ministry to present a monthly dataset on new car registrations by make, model, EV, ICE or PHEV, and state.
For more granular data to inform investors and government planners, the transport ministry could sell the data at a realistic price.
Import substitution
The third challenge facing Malaysia’s automotive industry is its continued orientation toward import substitution. This reflects the priorities of major legacy car makers, for whom local assembly primarily serves domestic demand, rather than supporting the more costly and complex push into export markets.
The challenge is to increase the export incentives beyond what’s currently on the table.
In Thailand, car makers that invest in local manufacturing must meet a key condition to qualify for incentives: they are required to export 1.5 vehicles for every unit they sell domestically.
Given that Proton and Perodua together control almost 70% of the market, with entry‑level models priced from RM40,000, the affordable segment is effectively safeguarded from significant disruption.
But will the two national car makers forever remain village champions or can they be incentivised to become car exporters to Asean?
Between them, Proton has the greater potential and advantage with the huge assembly plant they have in the Automotive High‑Tech Valley in Tanjong Malim, Perak. Perodua, on the other hand, is limited by its tie-up with Daihatsu.
Malaysia should concentrate more on automotive component parts especially in the automotive electronics area since we are a major global player in this space. Presently, there is a startling contrast between the E&E industry, which accounts for about 40 per cent of Malaysia’s total exports, and car export earnings, which are negligible.
Johari would have to perform a fine balancing act to turn Malaysia into Asean’s automotive hub.
The one thing that he has going for him is that E&E components account for 30 per cent of the value of today’s modern car which comes equipped with Level 2 Advanced Drivers Assistance Systems.
E&E is one of Malaysia’s core strengths in the manufacturing sector, and it is within the automotive supply chain, allowing Malaysia to leverage this advantage to achieve the targeted RM28 billion in export sales by 2030.
Yamin Vong is on Facebook yamin.com.my.
The views expressed are those of the writer and do not necessarily reflect those of FMT.