KUALA LUMPUR: National car companies Proton and Perodua have been asked to prepare their roadmaps on how they plan to be competitive once the auto industry undergoes wide-ranging liberalisation from 2015.
Those plans are essential as import duties and approved permits are to be cut and removed from 2015 until the industry is fully liberalised in 2020.
“At the end of the day, we want our automotive industry to remain and be competitive,'' said Malaysia Automotive Institute (MAI) chairman Datuk Kamaruddin Ismail in an interview with StarBiz recently.
“We have asked Proton and Perodua to present their competitive roadmaps and from there, we will chart it.”
MAI is an agency under the International Trade and Industry Ministry (Miti) that was established to be the focal point and coordination centre for the development of the local automotive industry.
The agency studied the proposed consolidation between Perodua and Proton, and from there drew up a number of scenarios highlighting the benefits and costs of such a merger.
With both companies now left to plan their future independently as the Government will not force a consolidation between Proton and Perodua, MAI CEO Madani Sahari said the study, nonetheless, looked at the options both companies could draw on as they prepare their strategies ahead of full liberalisation.
“They are putting a target of 2015 to reduce costs by a certain percentage and to improve quality to a certain level,” said Madani at the same interview,
“They have certain targets and, in a way, it is fast-tracking their competitiveness.”
He said such forward planning is not only required by the national makes but also by their component vendors as the MAI felt no competitive plan could be wholesome without the support of the component makers.
“It's about enhancing the ecosystem both upstream and downstream,'' said Madani.
The fast tracking of the 5 and 10-year plans for both national car companies is to ensure that those companies become competitive when barriers and duties are further liberalised.
The National Automotive Policy (NAP) outlines the long-term policy changes that will take place and has laid down the initial steps the country will take as it moves towards full liberalisation.
The Asean Free Trade Area (Afta) has seen import duties levied on cars made in South-East Asia drop and under the NAP, open approved permits will be the first to be done away with from the end of 2015, followed by franchise APs. The importation of used cars will cease in 2015.
“We have been telling them (the AP holders) and they knew that there will have to be an end to APs even before the NAP was announced. Under the NAP, open APs will have to be abolished by end-2015,'' said Kamaruddin.
Eventually, manufacturing licences, which are now granted for the production of cars that do not compete with Proton and Perodua, could be given for the make of any automobile.
“Come a time when Proton and Perodua say they are ready for competition, then we will open up,” Kamaruddin said of such manufacturing licences.
Another big reason why existing barriers would soon tumble is the free trade agreements (FTAs) that Malaysia has signed with a number of countries, namely Japan and South Korea.
The liberalisation on the domestic auto industry will be felt once the full impact of the automobile component of the FTAs with Japan and South Korea commences from 2018.
Adding to the pressure on existing barriers and duties is the country's desire to join the Trans-Pacific Partnership, a new regional trading block.
Post liberalisation, MAI intends to make Malaysia the most choice destination for automobile production in South-East Asia. To accomplish that, the country will be looking in-depth at the skills the auto industry in Malaysia will possess and offer to foreign companies.