ASIA has a strong capability to manufacture complex goods such as vehicles and access to a large and cheap labour force which is key to keeping production costs low.
Thanks to these, Asia region’s overall score has remained stable at 57.6 out of a possible 100 in the most recent update of Fitch Solutions Country Risk & Industry Research’s Autos Production Risk/Reward Index.
The Asia region successfully maintained its position as the most attractive region for vehicle production globally, followed by Europe (52.8) and the Americas (44.0).
Meanwhile, this quarter saw Malaysia’s overall performance improve enough to secure its position as the second most attractive market regionally with an overall score of 70.1 out of a possible 100.
Malaysia’s performance under the ‘Cost and Availability of Utilities’ indicator improved the most, increasing to 80.4 out of a possible 100, up from just 66.1 previously.
“Our Operational Risk team notes that relative to many of its regional peers such as Singapore and Hong Kong, Malaysia is richly endowed with natural resources, benefiting businesses with the widespread availability of reliable and affordable utilities, particularly fuel and electricity,” Fitch Solutions pointed out.
“Nevertheless, the Government will struggle to keep fuel prices stable through financial support because of a combination of the increased level of energy consumption and low tax revenue collection which will put a huge strain on government finances.”
The research house also pointed out that its power team highlights that in Malaysia, power capacity and generation have grown rapidly over the last five years to keep up with the country’s rising power demand.
“This means that automakers looking to set up shop in the country will have access to relatively low-cost utilities which will set Malaysia above the likes of India, a market which struggles to provide sufficient utilities at affordable rates.”
Furthermore, while the Malaysia’s vehicle production growth outlook is quite subdued, it is increasingly looking to climb the automotive value chain.
“We previously stated that Malaysia is well- positioned to move up the automotive value chain as a strong focus of the country’s newly revised automotive policy puts more emphasis on high-tech automotive solutions,” Fitch Solutions added.
In addition, the objective of the latest iteration of Malaysia’s National Automotive Policy (NAP2020) is to make a significant leap from the previous policy revision, to now focus on spearheading the digital transformation of the country’s automotive industry.
Growing technological trends in the global automotive industry such as autonomous vehicle technology, big data analytics and artificial intelligence (AI) among others, have been identified by the Malaysian Government in shaping the next step in Malaysia’s automotive industry over the next decade.
With autonomous vehicle technology becoming a more important trend in the global automotive industry, the necessity of analysing large data sets becomes ever more crucial, while progress in AI technology will enable more efficient and ‘smart’ manufacturing processes in global automotive assembly operations.
“We, therefore, believe the step taken by the Malaysian government to prioritise more tech-oriented automotive activities will provide sufficient competition to its regional peers as a tech hub for the automotive industry’s shift towards digital transformation,” added Fitch Solutions. – Jan 12, 2021
