Achieving double-digit growth these days is quite a challenge for the local automotive industry

By RAHIMI YUNUS / Pic By MUHD AMIN NAHARUL

THE last couple of years have not been that great for players in the automotive industry.

The total industry volume (TIV) — which breached the 600,000 level with 605,156 units delivered in 2010 — started seeing a decline in 2016 when sales went down 13% to 580,124 units.

Last year, the Malaysian Automotive Association (MAA) reported that the TIV of newly registered vehicles declined marginally by 0.6% to 576,635 units in 2017.

Some opined that the local auto market is already matured — especially 33 years after Proton Holdings Bhd rolled out is its first model, followed by Perusahaan Otomobil Kedua Sdn Bhd’s (Perodua) launch of the legendary Kancil nine years later.

As such, achieving doubledigit growth these days is quite a challenge.

For 2018, MAA projected a TIV of 590,000 units, a modest 2.3% growth from the figure reported last year.

The International Trade and Industry Ministry also published its forecast at an almost similar rate of a 2% increment to 591,000 units in 2018.

Frost & Sullivan was, however, a little bit more optimistic and projected the TIV to breach 601,000 units this year.

This figure might be achievable, but not without challenges.

New Launches, Strengthening Ringgit to Boost Market
Bermaz Auto Bhd, the distributor of Mazda cars in Malaysia, is one of the companies that seem to be more upbeat about the prospects for the year.

“Yes, I think the TIV forecasted (by Frost & Sullivan) is achievable with the impending of new launches by Perodua and other car marques in 2018, as well as a dwindling stock overhang in the market,” Bermaz Auto ED Datuk Francis Lee told The Malaysian Reserve (TMR).

He said new launches among auto companies are expected to be the main “encouragement” for more buyers this year, while the appreciation of the ringgit (currently at the RM3.90 level against the greenback) could just be the remedy for the industry.

Lee said Mazda’s best bet this year is the new CX-8 that could attract more buyers.

As for Perodua, the main driver for its sales volume would still be the current national favourite car, the Myvi.

Perodua president and CEO Datuk Aminar Rashid Salleh said the latest Myvi model received over 36,000 bookings within the last three months, with over 11,000 units already delivered to the customers.

Perodua has also set a modest target of 2% sales growth, or 209,000 vehicles this year, a slight increase from the 204,900 units it registered in 2017.

Based on internal calculations, Perodua matched its TIV forecast this year with MAA’s 590,000 units.

Such a figure will sustain the group’s market share at slightly above 35%, which is the same figure it recorded last year.

Other new launches expected for this year are Proton’s first SUV, the new Honda Accord and Toyota CHR, among others.

The industry recently saw the launch of the Kia Picanto and Volvo XC60 that seem to have added a little more excitement to the market.

Election Year Adds
Uncertainties to Market The upcoming 14th General Election (GE14) is also expected to have an impact on the auto market, and premium segment player Mercedes-Benz Malaysia Sdn Bhd (MBM) is finding ways to mitigate any shortcomings.

“My personal expectation is that the GE14 might just happen in the latter part of March.

“Taking seasonality of the market into account, there is always a great demand in the first quarter or six weeks of the year during the Chinese New Year period.

“Meanwhile, new launches usually come at the end of the first quarter, leading to the following quarter.

“This will coincide with the election period and would have effects on each other,” MBM passenger cars sales and marketing VP Mark Raine told TMR recently.

Another player in the premium segment, Volvo Car Malaysia Sdn Bhd (VCM), also anticipated uncertainties leading to the GE14.

“There are elements that drive the market, but others like the GE14 would bring a level of uncertainties to the market.

“In the end, you have to assess how Malaysia is doing in a very dynamic world of Asia,” VCM MD Lennart Stegland said.

Election Year Adds Uncertainties to Market
The upcoming 14th General Election (GE14) is also expected to have an impact on the auto market, and premium segment player Mercedes-Benz Malaysia Sdn Bhd (MBM) is finding ways to mitigate any shortcomings.

“My personal expectation is that the GE14 might just happen in the latter part of March.

“Taking seasonality of the market into account, there is always a great demand in the first quarter or six weeks of the year during the Chinese New Year period.

“Meanwhile, new launches usually come at the end of the first quarter, leading to the following quarter.

“This will coincide with the election period and would have effects on each other,” MBM passenger cars sales and marketing VP Mark Raine told TMR recently.

Another player in the premium segment, Volvo Car Malaysia Sdn Bhd (VCM), also anticipated uncertainties leading to the GE14.

“There are elements that drive the market, but others like the GE14 would bring a level of uncertainties to the market.

“In the end, you have to assess how Malaysia is doing in a very dynamic world of Asia,” VCM MD Lennart Stegland said.

What Next After EEV’s Success?
Energy-efficient vehicle (EEV) penetration in the country reached 52% last year, compared to 42.8% in 2016.

The Malaysia Automotive Institute (MAI) projected that EEV penetration would reach 60% this year.

More vehicles on Malaysian roads these days are EEV-certified — especially after the launch of National Automotive Policy 2014 (NAP 2014), which is aimed at positioning Malaysia as a manufacturing hub of EEVs in the region.

“The EEV incentive has been a very strong and forceful element in stimulating the EEV agenda. I think it is very successful in Malaysia.

“The next step after the plug-in hybrid vehicle is, of course, the battery electric vehicle (EV). We have to look at how that would fit into Malaysia’s future scenarios,” Stegland said.

As it is, MAI has been making efforts towards establishing battery manufacturing for EVs on the local scene together with lithium powder, battery cells and battery assembly packs useful for the production of lithium-based batteries in the country.

MAI has also made a technology projection that full electric-powered vehicles will be in a development phase until 2022 and will begin market entrance from that year onwards.

The NAP 2014 is currently being reviewed, leading up to the introduction of an updated version known as NAP 2018.

The revised framework will focus on mobility, next-generation vehicles, big data, lifestyle and connectivity, compared to NAP 2014 that focused on energy efficiency, safety and carbon emission reduction.

For a company like MBM, the government’s continued effort to uphold the current policy would provide a level playing field for all players.

“My wish further on is to have a level playing field, giving equal opportunities to all players in the market.

“I hope that the policy in place is long term because that helps us make the crucial investment decisions,” Raine said.

Commercial Vehicles a Different Story Altogether
Despite the rosy picture painted for the overall industry this year, the commercial vehicle (CV) segment is expected to tread on a rather thorny path.

MAA figures showed that the CV segment shrank 0.95% to 61,956 units last year.

In 2018, while MAA forecast the segment to grow 2.5% to 63,500 units, the industry consultant and research firm expects a contraction instead.

Frost & Sullivan anticipates the CV segment would decline further for the fifth year in a row to 61,000 units in 2018.

The number has been on a downtrend from 2014 to 2017. It went down from 78,124 in 2014 to 75,376 in the following year, and 65,579, 62,606 and 61,956 in the subsequent years — despite an improvement in the infrastructure sector.

Frost & Sullivan stated in its outlook report that excluding panel vans, all sub-segments — pickup, truck and others — witnessed a year-on-year decline compared to 2016’s figures.

The people at Swedish manufacturer Volvo Malaysia Sdn Bhd seem to be in agreement with Frost & Sullivan, and anticipate demands to be flat this year.

“We expect the demand for CVs in 2018 to remain about the same as in 2017.

“Construction will still be a major spending area from the government, but we realised that a lot of the construction equipment and vehicle purchases are sourced by the turnkey project supplier — thus the real impact on the demand of new CVs and construction equipment is in smaller quantum,” Volvo Malaysia MD Mats Nilsson said.

He added that CVs now have to survive in a period when most companies are curbing the increasing cost impact in doing business.

Dwindling disposable income among the customers is also one of the key challenges.

As for the effect of the impending election, Nilsson said some major purchases might be deferred after the GE14.

“In general, Japanese makes will still dominate the overall segment with their strong positions in the light-duty and medium-duty markets. The European brands will further strengthen their footage in the heavy-duty segment, as customers put further focus on uptime and total cost of ownership,” he said.

On EEVs, Volvo Malaysia sees it as a progression that CVs need to follow, and readiness is key.

“The EEV has been introduced in the passenger vehicle segment now for quite some years, with better awareness and acceptance of the technology.

“There are also the future trends for CVs to embark on — hybrid, electric trucks/buses are on testing or commercialisation stages, as demonstrated in several European countries.”

Nilsson said it is about the readiness of society to accept the technology, regulatory framework and the availability of infrastructure to support the development of EEVs, for the technology to be introduced in Malaysia.