Niche is better than mass



Consumers are demanding greener and more fuel-efficient cars.

By T.K. Tamby

The new National Automotive Policy tentatively scheduled to be unveiled by the second quarter of this year will focus on making Malaysia a regional hub for energy efficient vehicles (EEV).

This will include incentives to woo foreign brand owners to invest in this segment of the industry, says an official with the Ministry of International Trade and Industry.

Energy efficiency is a niche that will make Malaysia a hub of the future, especially with the growing global emphasis on lower carbon emission and fuel efficiency.

Malaysia had tried to build itself as an automotive hub for the Asean region, but Indonesia has overtaken Malaysia as the regional production hub by manufacturing 650,000 vehicles last year compared with Malaysia’s 605,000, while Thailand produced 1.64 million vehicles. Aware that it would lose the numbers game, the government has switched its focus to being a niche player instead of fighting to become a mass production hub.

As an EEV hub, Malaysia will not only stand out in the crowd of mass producers but also have a head start in its journey to achieve regional leadership position in this segment. The goal is to be a leader in this segment by 2020, says Deputy International Trade and Industry Minister Datuk Mukhriz Mahathir at the Dewan Negara mid-last year.

The focus on EEV will also see to the greater liberalisation of the automotive sector because the government is not only looking at wooing foreign investments but also to level the playing field.

According to International Trade and Industry Minister Datuk Seri Mustapa Mohamed, the ministry has consulted all stakeholders in the automotive sector and is in the midst of ironing out policy details, such as on technology, fuel emission, standards and quality as well as drawing up workable strategies on incentives.

The revised NAP is also expected to offer pre-packaged customised incentives to support the development of the EEV sub-sector, revealed Mustapa at the launch of the Kuala Lumpur International Motor Show 2013 earlier this year.

The focus on the EEV sub-sector includes the entire production chain, ranging from investments into new automotive technologies and engineering to the supply network and development of parts and components, human capital development, distribution and market expansion.

Analysts and industry observers expect attractive incentive packages to woo technology owners to invest in this sub-sector and to form partnerships with local manufacturers.

According to automotive analysts, there should also be incentives to promote research and development in this sub-sector for the creation new technologies.

“We should be looking at not only becoming a production hub but also a technology hub in this sector. Only then can we truly call ourselves, leaders in this segment,” Mustapa said.

Mustapa says the focus and liberalisation of the EEV sub-sector is part of the transition towards the opening up of the entire automotive segment, beginning 2015 with the realisation of the Asean Economic Community (AEC) and the implementation of free trade agreements between Malaysia and trade partners like Australia and Japan.

According to Pike Research, a part of Navigant’s Energy Practice which specialises in clean technology market, the annual worldwide sales of electric vehicles is expected to reach 3.8 million in 2020. Meanwhile, the Malaysian Automotive Institute has indicated that Asean will be at the verge of establishing its EEV market by 2015. Though sales of EEVs have not been rising fast enough for manufacturers, it continues to increase steadily with fuel remaining on the high side and customers constantly looking for alternatives.

To start the ball rolling, local brand owners Proton and Perodua are already investing in EEV, while foreign makers like Honda Motor is planning to set up an EEV plant here and Mazda Corp is looking at Malaysia as its Asean EEV hub.


Look out for part II of this story next week.



Photo credit: Flickr user Birmingham News Room

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