Asean car — the nucleus of Malaysia’s journey to become a developed nation

The venture has gained momentum when KL and Jakarta via MAI and IOI signed an MoA on Aug 12


The idea of producing cars made in South-East Asia for the South-East Asia market, or the Asean car, has been around for some time.

In 2015, Proton Holdings Bhd signed an agreement with PT Adiperkasa Citra Lestari to develop and manufacture an Indonesian “national car” and subsequently to explore the creation of an Asean car.

The proposal, however, met an early demise as Prime Minister (PM) Tun Dr Mahathir Mohamad, who was the former Proton chairman then, was made the persona non-grata of the car company after a spat with the former government at that time.

The news about the partnership raised eyebrows among Indonesians as Adiperkasa was an unfamiliar player in the local automotive industry.

At that time, Jakarta was already pushing for Esemka as the constituted national car. That plan also did not materialise.

But Barisan Nasional’s shocking defeat and Dr Mahathir’s return as the PM after the 14th General Election was kind of “the second coming” for the Asean car.

The proposal came to light during Dr Mahathir’s visit to Indonesia in June.

The venture has gained momentum when Kuala Lumpur (KL) and Jakarta via Malaysia Automotive Institute (MAI) and Institut Otomotif Indonesia (IOI) signed a memorandum of agreement (MoA) on Aug 12, to collaborate in the areas of human capital and supply chain development.

The aims are to enhance vendor capabilities, market expansion and technological research, which altogether could lead to the birth of the Jakarta-KL Asean car initiative.

Third National Car, Joint-Venture or Asean car?

Dr Mahathir first mooted the idea of the third national car during his visit to Japan.

Details about the third national car, touted by some as “Protiga”, remain sketchy. But comments, cynicisms and brickbats over the idea have been abundant. Proton’s stories which have become legendary old wives’ tales in the automotive sector frequently surface in almost all discussions about the third national car.

According to Nikkei Asian Review, the Malaysian government has sought assistance and cooperation from Nissan Motor Co Ltd and Toyota Motor Corp for the new national car venture.

The government could also enlist Korean or other Asian auto players down the road.

Entrepreneur Development Minister Mohd Redzuan Md Yusof said the project is set to be launched by 2020, and Finance Minister Lim Guan Eng has stressed that no public funds will be used for the project. It would be a truly private sector investment.

Now, for the Asean car, the buzz phrase has just added to the media circus.

Analysts do not expect the Asean car would be Proton 2.0. Firstly, it will be privately funded and secondly, it has an Asean-first approach.

However, it is hard to cement the ties if the Asean car will also be the country’s third national car initiative.

Putrajaya has seemingly reached out to Tokyo for Protiga and Jakarta for the Asean car.

Presently, it is anyone’s guess since high-level discussions are still ongoing.

“The final brand or manufacturer is still subject to studies and consultations,” MAI CEO Datuk Madani Sahari told The Malaysian Reserve in reference to the Asean car.

DRB-Hicom Bhd, the 50.1% owner of Proton, is revisiting the plan, said group MD Datuk Seri Syed Faisal Albar Syed AR Albar after he met the Council of Eminent Persons.

MAI has echoed that the development of the right ecosystem is para- mount for the local automotive industry.

Whether it is Protiga or the Asean car, many market watchers said the Malaysian market is too small to justify the creation of any new car company. That is where the Asean car concept comes in.

It could be just a matter of name convention as to how people want to describe it. To have a Malaysia-led giant carmaker in Asean and compete globally in the future, while having a spin-out effect in the national technological advancement.

That is Dr Mahathir’s vision.

What Can Malaysians and the Asean Communities Expect?

The Asean car will be developed for the future market. The agreement between MAI and its Indonesian counterpart is seen as a collaboration in the areas of human capital and supply chain.

Madani said the collaboration actually started in 2017 with 10 Malaysian vendors identified in a business matching programme involving 18 Malaysian and 30 Indonesian automotive companies.

Malaysia has some 641 vendors with over 100 of them capable of producing global standard Tier 1 components.

Indonesia has more than 1,000 vendors, mostly in Tier 2 and 3.

The latest agreement is aimed at enhancing the capabilities of vendors, market expansion and research on biodiesel, as well as technology including hybrid, electric and next-generation vehicles.

The next-generation cars would include electric vehicles (EVs) similar to Tesla. But it would require huge capital investments and partners that are willing to work with Malaysia or other Asean countries.

It is relevant for the Asean car to venture into energy-efficient vehicles which include the battery of EVs.

EVs are at an early stage of development as battery manufacturing capability on lithium powder, battery cells and battery assembly packs is ongoing.

The efforts to make an Asean car of tomorrow come with a huge challenge, especially on the technological front.

The agenda will likely require an alliance bigger than just a Malaysia-Indonesia car project.

WSA Group chairman and CEO Datuk Dr Wan Mohamed Wan Embong has offered some projection that the Asean car could eventually lead the path towards the formation of the Asean Motor Corp (AMC), akin to Europe’s Airbus SE in the aviation story.

The idea of a regional automotive cluster could be discussed between Malaysia, Indonesia, Thailand and Vietnam.

“After all, Vietnam is in the middle of developing its own car company,” Wan Mohamed said in a recent statement.

The Asean car is poised to capitalise on Asean’s huge market with a 650 million population.

Wan Mohamed said the AMC could target a market share of about 20% to 25% in Asean countries with a potential growth of 5% per year.

The total volume for Asean currently stands at over three million units per annum, including about 600,000 units in Malaysia and one million in Indonesia.

“It is thus not far-fetched to speculate that the growth of AMC will certainly stimulate the growth of related industries such as steel, plastic, electrical and electronics, and robotics. The knowledge in powertrain and propulsion technology will be useful to be exploited beyond the automotive industry and raw material production,” he added.

A Risk for the Industry

Big dreams come with big hurdles and, to some extent, provocation. The idea of an Asean car or the third national car has become one of many divisive topics.

Malaysian Automotive Association president Datuk Aishah Ahmad said the joint car development between Malaysia and Indonesia for the Asean car must get the support from the original equipment manufacturers (OEMs) in the respective countries for the project to succeed.

She said issues related to export restrictions need to be sorted out and the models to be manufactured must suit the needs of all the Asean countries.

She also argued that Malaysia does not need it as the local automotive sector is already developed and it has no economies of scale.

“The industry is already developed including the engineering and vendor side. We have more than 500 vendors today and other brands are using our local vendors. None of the other Asean countries have a national car, but they are doing well such as Thailand and Indonesia,” Aishah was reported as saying.

These days, OEMs have already stabilised their positions in the region with their own respective production and export strategy intra-Asean.

For the people on the street, they are largely concerned that the Asean car or the third national car could just be a repeat of Proton. To be fair, Proton did fulfil its initial purpose to galvanise the country’s engineering capabilities.

In the 1990s, Proton was the market share champion at 75%, but some missteps occurred somewhere along the road.

On another argument, some quarters have questioned Dr Mahathir’s passion towards the Asean car or the new national car, while the world is racing towards the use of public transportation, coupled with the threat from the ride-hailing services that make the need of buying a car much less of a priority in the future.

It is now not just putting pen to paper, but building a grand plan. Sweden has a less than nine million population and they have Volvo. China is gobbling component manufacturers and car-related companies worth US$5 billion (RM20.5 billion) in recent months including troubled Japanese airbag maker Takata Corp.

Could Malaysia wait and just buy another car brand, or could it be like the “Airbus” consortium and have a stake in the global car market? Only time will tell.