High localisation rates to boost UMW auto margins

  • Corporate News
  • Wednesday, 13 Mar 2019

PETALING JAYA: UMW Holdings Bhd’s automotive margins are set to get a boost from high localisation rates for its future models.

MIDF Research in a report yesterday said the group’s new Toyota Vios entails a localisation rate of 80% compared with 58% for the previous generation Vios.

“This is one of the highest localisation achieved for a non-national B-segment sedan. UMW expects all future models at its Bukit Raja plant to be as highly localised.

“While the localisation achievement was better than expected, this is in line with our thesis of UMW catching up in the energy-efficient vehicle bandwagon, having lagged behind key competitor, Honda on this front.”

The research house believes that UMW is on the right track and expects structural improvements in market share going forward, notwithstanding near-term gestation on earnings growth. 

Affin Hwang Capital also said the high localisation rates will lift the company’s auto margins.

“The higher localisation rates will positively lead to a reduction of excise duties, as designated in the Industrial Linkage Programme, which will potentially lift margins moving forward.”

Meanwhile, following a visit to the group’s Bukit Raja plant in Klang, CGSCIMB said the facility has a production facility of up to 100,000 units per annum.

“The Bukit Raja plant is designed to handle production of up to 100,000 units per annum but currently has an estimated annual production capacity of 50,000, which is higher than the group’s older Shah Alam plant running at 38,000 units production capacity.

“The plant is capable of producing B and C-segment vehicles under Toyota.”

The research house said it is impressed with the high level of automation at the plant, especially for the welding and painting processes that require minimal human intervention.

“For example, the plant has 61 robots to run a welding line for underbody and side panel spots, which help to reduce the line’s manual labour workload by 33%. The completed body will then be transported to the paint shop via an automated guided vehicle.”

Affin Hwang Capital said the group’s Bukit Raja plant is expected to drive production of passenger vehicles.

“Built with a total investment value of RM1.8bil, the new Bukit Raja plant is part of Toyota’s plan to reorganise its manufacturing lines in Malaysia, focusing on driving production of passenger vehicles with an initial capacity of 50,000 units per annum.

“The Bukit Raja plant plans to gradually fill up existing capacity with the two volume generative models, namely the all-new Vios (launched in January 2019) and Yaris (likely launch by April 2019). We gather that bookings for the Vios are encouraging,” it said.

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