Take a NAP

By Yamin Vong

THE Ministry of International Trade and Industry’s (MITI) announcement last week that the new National Automotive Policy (NAP2020) will be announced by Prime Minister Tun Dr Mahathir Mohamad on Feb 21 was mostly greeted with yawns.

The automotive industry has been waiting for almost two years for this version 3.0 to be announced. There’s no suspense for the participants because they have been asked for their opinion on the contents by MITI’s agency, the Malaysian Automotive Robotics and IoT Institute (MARii).

And the significant major change that is going to happen is that the excise duty will be minimised on plug-in hybrids and battery electric vehicles.

Hopefully, that will get more PHEVs (plug-in hybrid electric vehicles) and BEVs (battery electric vehicles) into Malaysia, but these changes will hardly disrupt the automotive industry.

Most of the participants in the automotive industry here are happy that their market is protected from new competition. With few exceptions, they would prefer Malaysia to be a country of import substitution.

Their Malaysian market territory is protected from new players that would enter the country if the NAP had incentives that really attracted the scale of new investments that Indonesia scored last year from Hyundai, Toyota and Honda. 

The NAP is supposed to make Malaysia a regional automotive hub. But it’s not going to be relevant at all because of the rapid changes in the global auto industry. In England, newly-elected PM Boris Johnson has declared no more sales of internal combustion engine (ICE) cars after 2030. He’s not alone but converging on a trend that’s been mandated by the European Union’s tax on carmakers that fail to comply with the EU’s Corporate Average Fuel Economy matrix.

About three years ago, Thailand launched its eco-car programme of incentives, effectively signalling that traditional internal combustion engine automotive industry investments were passe.

It was then anticipated that some of the car companies would channel their investments into Malaysia.

That hasn’t happened. Instead, Indonesia seems to have reaped the benefits.

Last November, Hyundai announced a US$1.5 bil research and 150,000 car-a-year plants to be built in Bekasi, east of Jakarta, with production to start in late 2021.

In that same month, Indonesia’s Industry Minister Agus Gumiwang Kartasasmita came back from a visit to Japan with a broad smile on his face.

The trend is clear: together with Toyota Motor Group’s planned investment of about US$2 bil from 2019 to 2023 and Honda Motor Company’s interest in investing Rp 5.1 trillion (approximately US$5 bil) he had reason to be happy.

Major Japanese auto investment in Indonesia

Indonesia is clearly overtaking Malaysia in the Asean automotive market.

“Malaysia’s automotive incentives are insufficient,’ says Datuk Dr Zahari Husin, former MD of Perodua Sales Sdn Bhd.

Incentives shouldn’t be seen only in the monetary sense but more in terms of attracting investors.

 “Now, the question is, why aren’t these investments coming to Malaysia which has the infrastructure and network of vendors. Why are they skipping Malaysia?

“Indonesia’s 350 million population and market demographics is one factor, but not the main factor,” Zahari said when we met last week.

Other industry participants, who asked that their identities be kept confidential, are more forthcoming.

Their opinion is that Malaysia’s incentives should follow the Thai model where investments, localisation, and manpower resources are matched with a menu of incentives that are transparent for all to see on a website.

Indonesia, under its second-term President Joko “Jokowi” Widodo has also refreshed its charge at the automotive industry and taken aim at electrification. And its liberal policies for the automotive industry are getting traction.

Going further, traditional government policies taking a linear approach will be ripped apart by the sea change in the global automotive industry.

Ramifying the EU’s direction to slash carbon emissions from cars, Jan 22, 2020 was a landmark day for the world automotive industry. On that day, an upstart car maker, Tesla, became more valuable than VW AG, the world’s biggest auto company. Tesla’s stock price hit US$880 and made Elon Musk, the founder, and his 10-year-old company the most valuable in the world auto industry.

At the Detroit autoshow in January, VW’s CEO Herbert Diess said the company will invest in an electric offensive and will build the future generation of electric vehicles in Europe, Asia and the USA.

By 2023, Volkswagen says it will invest over US$30 bil in electric vehicles, a sum roughly equal to the company’s combined profits from 2015 through 2018. By 2030, Volkswagen intends for electric vehicles to comprise 40% of its global sales. That’s the most ambitious target of any conventional automaker.

Tesla is iconic of BEVs, and since it launched its first such vehicle in 2008 and taking two years to deliver 20,000 units, Musk has proved to the world that BEVs are even more powerful and fun to drive than internal combustion engine cars.

It will deliver 500,000 Tesla vehicles this year from its new Giga factories in Shanghai and Fremont, California. Another Giga factory in Berlin is planned. From a capability of 20,000 BEVs in two years to 500,000 BEVs a year is a scale of change that the automotive world has never seen.

The Covid-19 outbreak has been forecast to dampen world trade since China accounts for about 18% of global manufacturing output. – Feb 19, 2020

 

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