PETALING JAYA: The next revision of the National Automotive Policy (NAP) is likely to focus more on attracting high-tech automotive component makers to invest in Malaysia, according to motor industry analysts.
They pointed out that much remained to be done if Malaysia wanted to catch up with Thailand's motor industry in terms of growth and export volume.
Thailand's Board of Investment recently said that in 2010, the country was the 12th largest automobile producer in the world, with 12 assemblers that had a combined production of about 1.64 million units (56% for export).
“It may be too late for Malaysia to attract investments from global carmakers that have made huge investments in Thailand, which is touted as the Detroit of Asia, and Indonesia. That is why the Malaysian government may put in more efforts and provide incentives for foreign tier-one automotive component manufacturers to come here,” said an industry observer.
He pointed out that unlike Thailand, Malaysia's motor industry was not perceived as being export-oriented.
“We are mainly a domestic buyers' market and our production is mostly focused on domestic demand.”
He said to compete with Thailand, Malaysia had to provide better incentives for foreign carmakers or component manufacturers, such as giving free land or tax rebates for 15 years.
He also pointed out that the Government needed to do more to support the domestic motor industry.
“Look at Thailand. Last August, the Thai government announced that first-time car buyers would get tax waivers of up to 100,000 baht (RM9,840) for new passenger cars or pick-up trucks that are priced below 1 million baht (RM98,400). Of course, there were conditions attached such as that the car cannot be re-sold within the first five years of ownership.”
A local daily recently quoted International Trade and Industry Minister Datuk Seri Mustapa Mohamed as saying that a revised NAP would be introduced in two months, and key areas that the Government was looking into included further liberalisation for the 1.8-litre passenger car segment and more focus on the development of energy-efficient vehicles.
However, motor analysts said it was not clear how the 1.8-litre passenger car segment would be liberalised for foreign carmakers.
The current NAP, which was last revised in October 2009, had lifted the freeze of new manufacturing licences for luxury passenger vehicles with engine capacities of 1.8-litre and above, and on-the-road prices of not less than RM150,000.
No equity conditions were imposed on the new manufacturing licences, which meant that foreign companies could own 100% of the manufacturing entity.
“The minister did not make it clear whether he was referring to the 1.8-litre and above, or the 1.8-litre and below passenger car segment. However, it is unlikely that protection for the 1.8-litre and below segment would be removed as this is where the national carmakers dominate,” said a bank-backed motor analyst.
The analyst said the Government might remove the condition of having a RM150,000 basement price for the 1.8-litre and above passenger car segment.
“This would boost demand for such cars, as the foreign carmaker can sell such cars at more competitive prices,” he said.
OSK Research concurred and said in a report that it was possible that the Government might relax the RM150,000 price criteria, which could pave the way for the entry of Volkswagen in a bigger way, as well as other carmakers.
Regarding the expected focus on energy-efficient vehicles in the next revision of the NAP, analysts said the upcoming policy changes would need to allow carmakers to price their hybrid and electric cars as competitively as possible.
“Without significant domestic demand for hybrid and electric cars, there would not be any reason for carmakers to invest in manufacturing facilities for such cars here. Such cars are still considered to be expensive in Malaysia, even after the removal of duties in the last two years,” said another analyst.
He pointed out that Toyota was presently producing hybrid cars in Thailand. “It would not be easy for the Government to draw global hybrid car makers here.”
He also said the upcoming revised NAP needed to provide a clear picture for foreign carmakers or component manufacturers who wanted to invest in Malaysia.
“The current NAP has many grey areas. Foreigners perceive the Malaysia motor industry as a highly-protected environment where conditions are even set on product pricing,” he said.
However, RHB Research Institute said the revised NAP, which is expected in April, could be a major milestone for the motor industry.
“The revision is expected to emphasise continued liberalisation of the industry in the attempt to claw back the lead held by Thailand and Indonesia as regional automotive-manufacturing hubs, and build on Malaysia's niche for hybrid vehicles,” it said.