Bermaz Auto poised for further growth


“We are embarking on a new journey to re-launch two very familiar brands in Malaysia – Peugeot and Kia. These brands used to be very popular and we need to re-engage existing customers to give them confidence that as a new custodian, we are committed to ensuring that their ownership experience would be better and we will drive down their ownership cost, ” executive chairman Datuk Seri Ben Yeoh tells StarBizWeek.

Bermaz Auto Bhd (BAuto) is very optimistic of growth opportunities for Peugeot and Kia cars in Malaysia, although the task is challenging given the Covid-19-ravaged economic environment, says the group’s executive chairman Datuk Seri Ben Yeoh.

“We are embarking on a new journey to re-launch two very familiar brands in Malaysia – Peugeot and Kia. These brands used to be very popular and we need to re-engage existing customers to give them confidence that as a new custodian, we are committed to ensuring that their ownership experience would be better and we will drive down their ownership cost, ” Yeoh tells StarBizWeek.

BAuto, which distributes Mazda vehicles and spare parts in Malaysia and the Philippines, had been in talks over the past few months to secure a collaboration with South Korean car manufacturer Kia Motors Corp after the Naza Group confirmed late last year it will be relinquishing its Kia and Peugeot businesses.

The negotiations resulted in BAuto successfully announcing a partnership earlier this month with Kia Motors, which would see a new company – Kia Malaysia Sdn Bhd (KMSB) – assemble Kia vehicles in Malaysia.

The Kia Seltos B-segment sport utility vehicle (SUV) and Kia Carnival multi-purpose vehicle (MPV) are slated to start production under the new set up within the next two years, while a third model will be determined at a later stage.

Kia Motors stated that it intends for KMSB to be the regional manufacturing hub for Asean countries and other potential markets.

BAuto and Kia Motors would hold 33.33% and 66.67% stakes in KMSB respectively.

BAuto will fund its portion of its 33.33% of the share capital of KMSB of RM20mil from internally generated funds.

BAuto’s subsidiary, Dinamikjaya Motors Sdn Bhd (DJMSB), was appointed as the new distributor of Kia vehicles in Malaysia.

Dinamikjaya holds the right to distribute and sell Kia vehicles, sell genuine parts as well as provide after-sales services.

Securing the Kia partnership was another feather in the cap for BAuto after its 20% associate Berjaya Auto Alliance Sdn Bhd (BAASB) was awarded the sole distributorship of Peugeot cars as well as after-sales and spare parts distribution for Peugeot, Citroen and DS cars in Malaysia by Groupe PSA in December 2020.

BAASB is a jont-venture company formed by Berjaya Corp Bhd (51% stake) and Bermaz Auto.

Previously, Naza Group was the sole distributor for the three French vehicle marques.

Yeoh said BAuto’s key focus will be to upskill the whole Peugeot and Kia dealer network from sales to after-sales, to meet the growing demand from customers and fulfilling their expectations.

“As an organisation committed to fulfilling our obligation to customers through a good ownership experience, we believe that we can reposition the brand value and create better sales volume through the process.

“Today’s customer’s preference will be on products that are environmental-friendly with high safety standards, good levels of connectivity and autonomous features, ” he says.

Regarding sales targets, Yeoh says the plan is to grow the Peugeot and Kia brands at a steady pace, and the first priority is to address all the legacy issues pertaining to the poor after-sales and unavailability of parts.

BAuto plans to address Peugeot’s after-sales service issues “with new programmes for service maintenance and warranty, which will ensure a better ownership experience, similar to our current practice, ” says Yeoh.

He notes that the Kia brand also faces some legacy issues which needs immediate attention.

“The current dealerships have been advised to take active measures to improve the situation.

“We will, on our part, continue to assist in upskilling the dealer network, to ensure better engagement with the customers, ” says Yeoh.

As for vehicle production and upcoming launches, Yeoh said Naza Automotive Manufacturing (NAM), which is now under the control of the Stellantis Group, will continue with the completely-knocked-down (CKD) production of the Peugeot 3008 and 5008, and the new 2008 which will be launched in the last quarter of 2021.

“Kia’s growth will be on CKD activities and competitive products, ” says Yeoh.

The assembly of Kia cars will be contracted to the Inokom Plant in Kedah, which has excess production capacity, with production targetted at 5,000 cars annually in 2022 and 2023.

“The local production will also involve localisation activities involving our local parts vendors.

“Hopefully, this will expose our vendors to new manufacturing technology with possible joint ventures and technical collaboration between South Korean vendors and our vendors. These additional manufacturing activities will have a positive economic impact, particularly for the Northern region, ” says Yeoh.

“Kia cars production volume will increase with the introduction of new CKD models in 2023 and 2024, ” he added.

Regarding the Mazda brand, Yeoh points out it is relatively established as BAuto has been the distributor for the last 12 years, and the group enjoys strong Mazda owners’ support with high retention factor.

“For 2021 Mazda sales outlook, we are looking at about 13,000 units in the domestic market, ” says Yeoh, adding that possible future growth would come from new CKD and completely-built-up (CBU) models.

Regarding car exports, Yeoh points out that Mazda and Peugeot cars are presently exported to Asean countries through Mazda Malaysia Sdn Bhd and the Stellantis Group respectively.

“For Kia vehicles, we are also planning to export to Asean countries in the near future through the joint-venture company, ” he says.

Meanwhile, research analysts are positive on BAuto’s partnership with Kia Motors.

MIDF Research in a report says the new venture maintains an asset-light structure with BAuto only taking a minority 33% stake in the capital expenditure (capex)-intensive assembly unit under KMSB, whereas for the capex-light, highly cash-generative distribution business under DJMSB, BAuto takes a controlling 65% stake (the remaining 35% stake is held by original promoters of the company).

“This is broadly similar to the existing structure it has with its joint venture with Mazda.

“The former involves a total equity investment of RM60mil (BAuto’s portion: RM20mil), while the latter involves an investment of RM3.25mil for BAuto’s 65% stake, ” says the research unit.

In terms of distribution, there is currently a 34-strong dealer network carrying the Kia brand.

MIDF Research also opines that over the mid-term (within four to five years), the Kia venture might match or even exceed the sales volume of BAuto’s Mazda operations (around 10,000 to 12,000 units per annum).

The research unit adds that it is possible for DJMSB to be profitable within the first year of operations (financial year ending April 30,2022 or FY22), based on a targeted 2,000 to 2,500 units FY22 sales.

It notes that as a yardstick, BAuto’s Mazda operations turned in profit after tax (PAT) per car of RM6,400 to RM7,500 during its early years of operation between FY10 to FY13, while post FY13 after its maiden CKD CX5 model was launched, PAT per car rose to an average RM12,200 (ranges between RM7,900 to RM16,000 per car).

“Taking the mean of the pre- and post-CKD PAT per car trend and applying a 10% discount (assuming BAuto generates lower margins from Kia models), we derive a conservative RM8,500 per car PAT margin assumption for the Kia venture, ” says MIDF Research.

It adds that DJMSB can potentially generate a PAT of RM17mil to RM21mil for FY22 (or profit after taxation and minority interests (Patami) of RM11mil to RM14mil based on BAuto’s 65% stake), thus implying a 12% to 15% PAT impact (8% to 10% Patami impact) in its first year of operations.

The impact should grow even more meaningful once DJMSB reaches 7,000 to 10,000 annual sales, at 41% to 59% PAT impact (27% to 38% Patami impact), according to MIDF Research.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3

Bermaz , Ben Yeoh , Kia , Peugeot , Mazda , revitalised ,

   

Next In Business News

Asia shares spooked by US inflation scare, hope for Fed calm
Asia shares spooked by US inflation scare, slip to 7-week lows Thursday
Bitcoin ticks back in Asia after Musk tweet sent price down 17%
Tesla stops taking bitcoin payments for vehicles over climate concerns
Vegetable Oils surge, Soy futures reach highest since 2012
Jobs, inflation data surprises not changing Fed plans
Oil price rises to 8-wk high on demand hopes, U.S. export decline
GLOBAL MARKETS-Wall Street skids on inflation fears; USD, bond yields jump
Capitalising on loan growth
Teo Seng invests in new equipment

Stories You'll Enjoy


Vouchers