KUALA LUMPUR: A global carmaker is close to completing a deal to acquire a majority stake in Naza Group’s manufacturing assembly plant in Gurun, Kedah, sources said.
The Gurun plant, which assembles Peugeot and Kia cars, has an annual production capacity of 50,000 vehicles a year.
“The deal that will be signed next week will spell out the terms to make the Gurun plant its base for the domestic and Asean market,” said a source from the authorities.
The deal, which is being finalised, will see the global partner taking control of assembly and production at the Gurun plant.
Naza will retain the distributorship of the brand in Malaysia, with the possibility of expanding its dealership to neighbouring countries, sources said.
“Naza has built up an extensive network of showrooms and dealerships in the country and is looking the expand the business with the right partner,” another source said.
The deal, if it goes through, would be somewhat similar to the tie-up between Zhejiang Geely Holding Group Co Ltd and Proton Holdings Bhd.
Proton’s owner, DRB-Hicom Bhd
, had in June last year selected Geely over Peugeot maker Groupe PSA as a global partner for Proton following an extensive six months bidding process.
Under that deal, Geely acquired a 49.9% stake in Proton from DRB-Hicom and took control over the brand’s manufacturing and production operations.
Led by its new chief executive officer, Dr Li Chunrong, Proton is working to accelerate introduction of new models, cut total cost by 30% and retake a third of the domestic market share.
It is also eyeing to grab a tenth of the booming Asean car market.
“The Gurun plant would give the global carmaker a ready manufacturing hub with enough capacity to target demand in the Asean region,” the source said.
Set up in 2004 and owned by Naza Automotive Manufacturing Sdn Bhd, the plant is located on a 140-acre site that comprises an assembly plant, an office building, a test track, as well as lots for vendors and suppliers.
The company was reported to have invested more than RM700mil over the years to build up the plant.
In late 2011, Naza rolled out the 150,000th vehicle produced at the plant, but production has since slowed and sales of the two Peugeot and Kia brands on the local market have slumped.
Latest official sales figures released by the Malaysian Automotive Association (MAA) revealed that only 4,131 units of Kia vehicles were sold in 2017, down from 4,370 units registered in 2016.
Peugeot fared better, with a slight pick up to 1,924 units compared with 1,710 units a year earlier.
The low sales figures had forced Naza to lay off part of its workforce at the Gurun plant last year.
Last year, in an interview with StarBizweek, Datuk Wira SM Faisal SM Nasimuddin and his younger brothers who are jointly managing the Naza Group's sprawling business empire have expressed their desire for the brands’ principals, especially Kia and Peugeot, to take a larger role in the car business in Malaysia and eventually in Asean.
With each business now on a five-year roadmap in terms of the direction they are headed, Naza wants the principals it is in business with to have equity partnerships with the group.
The brothers said the longevity of the auto business is more secured when the principal buys into the business.
“We have our own strengths that can complement our principals. We can also get involved in the regional vision as well,” they said.
Apart from the auto business, which accounts for 60% of group revenue, the group’s other large business interest is in property development.
The automotive business remains the mainstay of the group but the business, like the industry, has suffered from the downturn in car sales.
While the total industry volume (TIV) in the domestic market has stagnated at below 600,000 units a year, the market for new cars is growing across the region.
New vehicle sales in southeast Asia’s six largest markets increased by more than 4% to an estimated 3.38 million units in 2017, with Indonesia leading at 1.08 million units, followed by Thailand at 870,00 units and Malaysia at 576,635 units.
In the Philippines, new vehicle sales grew 17% last year to 474,000 units.
The prospect of strong car sales growth in the region is driven by rising incomes and an expanding middle class in expanding economies.
In Malaysia, Honda saw a 19% jump in sales volume to 109,511 units last year as the Japanese carmaker strenghtened its grip on the number two spot.
Perodua, formed via a joint venture between Malaysian and Japanese partners, remained the number one seller with 204,887 units sold.
Proton barely defended its third spot with 70,991 units sold, followed by Toyota with 69,492 units.
The Malaysian Automotive Association is projecting new car sales in 2018 to grow to 590,000.
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