Naza to leave auto business?

Group said to focus on CBU and AP businesses, while its CKD and manufacturing go to Berjaya directly or BAuto

by RAHIMI YUNUS / pic by MUHD AMIN NAHARUL

NAZA Group of Cos’ recent move to surrender its Kia and Peugeot distributorships has raised suspicions that the company could be considering exiting the automotive business.

Tan Sri Ismee Ismail’s appointment a few months ago was aimed at chairing a transformation committee tasked to evaluate and reset the family-owned business, according to sources.

“Ismee will focus on an exit strategy and set a new direction for the Naza family.

“At the moment, the family will only focus on completely built-up (CBU) and approved permit (AP) businesses. All completely knocked-down (CKD) and manufacturing will go to either Berjaya Corp Bhd directly or Bermaz Auto Bhd (BAuto),” one of the sources close to the development told The Malaysian Reserve (TMR).

The source said Naza weighed pulling out of automotive in phases, starting with the CKD business by year-end before finding suitable buyers for its CBU segment, which involves luxury marques.

Datuk Nik Hamdan Nik Hassan, the group CEO of automotive group at Naza Corp Holdings Sdn Bhd, declined to comment when contacted by TMR.

Naza distributes Kia vehicles under Naza Kia Malaysia Sdn Bhd, while Nasim Sdn Bhd distributes the Peugeot brand.

In February 2018, Naza Corp Holdings entered a share-sale agreement and a joint-venture agreement with French automaker Groupe PSA and established a shared operation of Naza Automotive Manufacturing Sdn Bhd (NAM) plant in Gurun, Kedah.

NAM distributes Peugeot, Citroën and DS Automobiles under PSA to Asean countries.

Naza is also the exclusive importer and distributor of Ferrari and Maserati brands through Naza Italia Sdn Bhd.

The privately-owned conglomerate is also a dealer of Mercedes-Benz cars via NZ Wheels Sdn Bhd, besides being the sole importer and distributor of the Ducati brand.

On the CKD front or locally-assembled cars, the source said Kia and Peugeot brands are expected to issue notice and notify to terminate the agreement or mutual separation to Naza.

As for Berjaya, the source said people from Peugeot met its founder Tan Sri Vincent Tan two weeks ago to discuss the new deal. BAuto declined to comment to queries from TMR.

“With reference to your queries, BAuto is unable to comment at this point in time. Best to wait for an official announcement or statement,” a representative at the company told TMR.

Meanwhile, Datuk Samson Anand George is said to be taking up equity in the new Kia distributorship with BAuto and will be a key person in managing the Kia business in Malaysia, according to people close to Kia Motors Corp.

Samson, the former group CEO of Naza’s automotive group, no longer holds any executive position at Naza after he was succeeded by Nik Hamdan.

Besides Berjaya, PSA had also approached Sime Darby Bhd and UMW Holdings Bhd for the new Peugeot distributorship, three people with the knowledge of the matter told TMR.

Peugeot agents approached UMW last year, but the latter declined the offer, one of the people said.

Sime Darby is also not going to be the new distributor of Peugeot, one of the source said, adding that “another company” will be making an announcement soon regarding the matter.

An industry source said BAuto wants Kia because it has common technology and ownership with Hyundai Motor Co, but it could be a bit complicated for the brands under PSA.

On the CBU front or imported cars, a source said a company is preparing pitch documents to interested parties to acquire the premium automotive brands under Naza’s portfolio. The source added that this is still at a very early, preliminary stage.

In a recent interview with The Edge, Naza Corp Holdings joint group executive chairman SM Nasarudin SM Nasimmudin said the company will maintain its high-end cars.

A source said the whole automotive business contributes about 80% of Naza’s earnings, with 60% of that coming from Kia and Peugeot.

The source said sales of Kia and Peugeot easily make between RM50 million and RM60 million a month for Naza, while sales of Ferrari cars contribute RM5 million a month.

“When the two businesses (Kia and Peugeot) are closed, there will be a big hole at Naza. The company must have some other strategy,” the source, who is familiar with Naza’s financials, told TMR.

TMR reported in February that the Suzuki brand is making a comeback to Malaysia with Naza. The source said nothing is official yet with Suzuki Motor Corp, and Naza is in a dilemma whether to continue as, according to Ismee, there is no good business prospect.

Besides automotive, Naza is involved in property and infrastructure, asset management, technology and others.

Overall, the source said a potential exit from automotive by Naza is due to the industry becoming increasingly challenging, particularly as the group previously enjoyed good concessions, low duty and incentives for semi knocked-down vehicles.

An industry expert said an average European car brand can be a hard sell in Malaysia due to higher maintenance costs than Japanese models, hence a low secondhand value and viewed as not well acclimatised to tropical weather.

In the interview with The Edge, SM Nasarudin said Naza also faces issues of thin margin and the power to decide for the car brands, instead of taking directions from the principals.

Granted, SM Nasaruddin said the Covid-19 pandemic could be the final nail in the coffin and present an opportunity for the group to transform towards “Naza 2.0”.

A rethink at Naza also raises questions on the prospect of the government vehicle fleet concession contract that was reportedly secured by the company.