Perodua to tie-up with Toyota Japan

  • Business
  • Saturday, 15 Mar 2003


PERUSAHAAN Otomobil Kedua Sdn Bhd (Perodua) may be a small carmaker but its aspirations are by no means of that scale. It is believed that Perodua is tying-up with Toyota Motor Corp for an assembling contract. 

Negotiations are currently being pursued towards this end and if the plan pulls through, the main benefit of its tie-up with Japanese partner Daihatsu Motor Company Ltd will soon be reaped. 

“It is only a natural turn of events ... Perodua is manufactured by Daihatsu, which (in turn) is owned by Toyota. So, it is a natural progression,” says an industry source. 

Toyota Japan holds 51 per cent of Daihatsu Japan, which in turn has a 51 per cent stake in Perodua’s manufacturing arm – Perodua Auto Corp Sdn Bhd. 

The source says the tie-up with the global player is currently in the initial stages of being worked out but an announcement towards this end will be made very soon. The actual assembling, however, he says, may start some time mid-next year. 

The source adds that it may entail vehicle assembly and painting. “But it will be only for the local market,” he notes. 

In recent weeks, it has been largely speculated that Perodua is securing a vehicle assembly contract from a global automotive player with the possible candidate being Toyota Japan.  

One analyst from a local research house is rather upbeat on the potential tie-up.  

“Although the financial impact cannot be quantified yet, we are of the opinion that Perodua will transform into a significant automotive company in the region. It indicates that Perodua’s assembly facilities are world class,” says the analyst. 

The analyst speculates that Perodua may build the low-end Toyota sedan but UMW Toyota, given its strong association with the Toyota brand, may undertake the distribution. 

The move by Toyota Motor Corp to accord Perodua the assembly contract comes as a surprise as UMW HOLDINGS BHD’s 51 per cent-owned UMW Toyota Sdn Bhd handles the assembly of Toyota vehicles via wholly-owned Assembly Services Sdn Bhd. UMW Holdings also has a 38 per cent stake in Perodua. 

But sources say the quality of Perodua's assembling and painting has attracted Toyota Motor to the local automobile manufacturer.  

An analyst from a foreign research house says it is likely that the assembling contract will be for a small number of cars, possibly about 10,000 units or less considering Perodua is already almost running at full capacity. 

Perodua’s Rawang plant has a production capacity of 150,000 units of vehicles per year and is running at a production of about 130,000 units per year. Push comes to shove, however, Perodua’s large land bank of 200 acres of which less than half is currently utilised, could be tapped to increase capacity. 

Much earlier, Perodua officials have mentioned that the medium to long-term plan is to increase production capacity to 240,000 units. 

Another analyst from a foreign brokerage is equally positive on the possible development. 

“It should work out quite well for Perodua, since Daihatsu (and Mitsui) came in as controlling shareholder, the efficiency levels have gone up. The new models, both the Kelisa and the new Kancil, are really good, and can actually match any foreign makes,” the analyst from the foreign brokerage adds. 

Since the Japanese parties took control of Perodua's automobile manufacturing, efficiency levels have increased, and production costs have been slashed considerably by some 30 per cent.  

MBM RESOURCES BHD officials, at an analysts' briefing held earlier this month had hinted of the possibility of its 23.6 per cent-owned Perodua securing an assembling contract for a motor industry giant, and only stopped short of naming the company. 

At the briefing it was also revealed that Perodua, as part of its Afta strategy, would be releasing a new vehicle, the Asean car, a new model under Daihatsu catering for the South-East Asian market in 2005. 

The lack of new models may be a concern for the local auto manufacturer, as the model replacements are mere facelifts for two vehicles, the Kembara and Kancil and are not expected to catch on. 

Research House GK Goh states that Perodua sales may decline by as much as four per cent this year from a lack of new models, after registering some 15.7 per cent growth in 2002, to 127,571 vehicles from 110,304 vehicles the preceding year.  

The move to give the Japanese partners in Perodua Auto Corp the controlling stake was previously said to be a boost, to increase efficiency levels, to make local car manufacturer more competitive with the advent of the Asean Free Trade Area (Afta) regulations, which will remove Malaysia's high import tariffs on motor vehicles from the Asean region.  

Motor tariffs are expected to be reduced from about 42 per cent come January 1, 2005, i.e. the advent of Afta.  

Market talk has it that the government will be making an announcement sometime next month on the new tariff scheme, after which Perodua will make it known its assembling contract with Toyota. 

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