An interesting opinion article this week predicted that the general election on Nov 19 will return a hung government or a coalition government.
Whichever happens, I think most of us hope to have a prime minister with the brains and the ambition to propel Malaysia back to its glory days.
I remember those times when we went overland through continents with the Petronas Adventure Team; when we stopped at towns, the local people would speak highly of Malaysia.
Conversely, in Balikpapan recently, my friends from the Indonesian 4×4 fraternity were scathing in their remarks about Malaysia and world-class corruption.
Talking about glory days, I would like to talk specifically about our automotive industry where Malaysia was the leader in Southeast Asia and Volvo cars were one of the first to be assembled in Shah Alam in 1967 by Swedish Motor Assemblers. Datsun cars were also among the first in Southeast Asia to be locally assembled by the late Tan Yuet Foh and his brother in their plant at Segambut which still assembles vehicles.
Today, Malaysia is in third place in the Southeast Asian automotive business because of the history of the national car, protectionism of the local market and mandatory Malaysian equity conditions that left foreign investors cold.
With the onset of electric vehicles (EV) and autonomous vehicles (AV), the appeal of the automotive industry as a creator of high value jobs and a generator of wealth including foreign exchange earnings is even more relevant to Malaysia.
The major car makers from Japan already have roots in Malaysia and they would invest more in EVs and the EV ecosystem such as traction batteries and engine control modules for export if they were incentivised.
But let’s look at what’s happening now, which is that China’s automotive industry has become the world’s biggest and its EV sector, which is also the world’s biggest, is a global disruption that Malaysia should seek to benefit from.
In this context of the ongoing disruption of the global auto industry, the solution is that a new prime minister must re-write the National Automotive Policy with a blueprint of details to assist investors to make decisions.
An important principle is that foreign companies should be allowed to own 100% equity if they invest, say upwards of RM50 million.
Let’s say that Geely, Great Wall Motors (makers of Haval, SAIC (the MG ZS EV) and BYD (e6 MPV) – Chinese car companies already in Malaysia – were offered 100% equity for their investment to assemble EVs in Malaysia.
I’m sure that at least one of them would set up a fresh company to assemble for the domestic market and later, for export to Southeast Asia. For that matter, the Japanese car companies would also be interested to start afresh in zero emissions automotive R&D and assembly if they have 100% equity. The logic is simple: why would they want to share their technology and profits unless they own the investment 100%.
When Dr Mahathir Mohamad was international trade and industry minister, he understood what made Malaysia interesting to foreign investors.
When he later became prime minister, he announced a raft of incentives to promote manufacturing investment under the Investment Incentives Act 1986. He liberalised equity incentives for foreign investors in the manufacturing sector. It was very successful and the Taiwanese and Japanese came and set up factories.
Foreign direct investment jumped for many years following the incentives that were drafted by the Malaysian Industrial Development Authority.
Current megatrends present a fresh opportunity for Malaysia in the automotive sector.
Globalisation is fading and is being replaced by de-coupling as the Japanese and South Korean car companies find ways to escape the US-China trade war and its implications on the supply chain.
According to a Nikkei Asia report, these companies are striving to build supply chains that do not depend on China, amid that country’s growing conflict with the US.
“This past summer, a top-secret project was in full swing at Honda Motor – a massive restructuring plan to explore building passenger cars and motorcycles using as few China-made parts as possible.
“China accounts for more than 30% of Honda’s global sales, and the company’s policy of making China a mainstay of its earnings will not change in the future. Although the automaker has no intention of leaving China any time soon, it is facing the China risk head-on to ensure the company is prepared for an emergency.
“The company is rushing to estimate the cost of procuring parts from other regions, such as Southeast Asia, while parts for cars to be built in China will be procured within the country,” said the Nikkei Asia report.
For the China car companies with offices in Malaysia, they ask what are the government incentives for them to invest in Malaysia. “Can we get Proton’s incentives?” referring to the 30,000 CBUs that were approved for the X70 and, subsequently, the X50.
And that’s the reason we need to elect a new government that liberalises the automotive industry or forever accept that foreign investment and opportunities will flow past to Indonesia and Thailand, and more recently Singapore. The new Hyundai Motor Group Innovation Center (HMGICS) in Singapore features an electric car factory to make 30,000 electric vehicles by 2025.
