Overview of Malaysian automobile industry

Overview of Malaysian automobile industry - In Malaysia, the expansion of sales and production of motor vehicles took place through different phase of development in response to different policy initiatives and other factors: import-based industry 1957–1966; import-substitution 1967–1982; joint national automobile programme with Japanese auto makers 1983–2003; independent national automobile industry from 2004 to the present loosing market shares to foreign controlled (and ‘ex-national’) firms in the domestic market.

By the end of the 2000s the automobile industry in Malaysia consisted of 15 motor vehicle producers (OEMs) of which six are motor vehicle manufacturers and nine are assembling companies including franchise holders having rights to assemble, and most are non-national car assemblers like Toyota and Honda.

As of June 2009, the two designated ‘national’ car manufacturers, Proton and Perodua1 , captured 57.8% of the total vehicle market with 27.1% and 30.7% controlled by Proton and Perodua, respectively2 (MAA, 2009a).

The national automotive sector in Malaysia has de facto been reduced to one corporation3 , Proton, and the totally installed domestic capacity is above 960,000 motor vehicles (MIDA, 2009).

Compared to domestic production around 530,000 units in 2008 the capacity utilisation of the domestic automobile industry is 55.2% at the peak of production.

The competitiveness of the Malaysian automobile industry hinges very much on the quality, efficiency and delivery capabilities of the auto components and parts sector.

These auto component and part suppliers service two markets, the original parts and components demanded by the vehicle makers (OEMs) and replacement equipment market (REM) where items are being bought by repair shops and individual customers.

In 2008, there are around 690 firms manufacturing and supplying over 4000 automotive component and parts (MIDA, 2009) and of this, 70% are OEM supply. The component and parts sector accounted for RM 6.37 billion in sales with RM 4.6 billion and RM 2.0 billion in imports and exports in 2008, respectively.

Around 45 components manufacturers export components and parts primarily within low-tech products like steering wheels, rims, brake pads, wheels, bumpers, bodies, exhausts, radiators and shock absorbers.

Among the original equipment suppliers (OES) major players include the foreign manufacturers such as Delphi Automotive Systems, TRW, Siemens VDO, Bosch, Denso and Nippon Wiper Blade while the major local players include APM Automotive, Sapura, Delloyd and Ingress (MIDA, 2009).

Some of the firms (Ingress, Hicom Teck See, Sunchirin, APM Corporation and Delloyd) have established investment in ASEAN countries like Thailand and Indonesia.

Despite some well-established firms in this segment, a majority of the firms are still lacking in terms of technology progress (Simpson et al., 1998; Zadry and Yosof, 2006; Rosli and Kari, 2008; Wad, 2008).

In the OEM segments, transnational OEMs have established ever-rising international standards of global brands including the ISO/TS 16949 (Wad, 2006).

Investments in technology and R&D are still too low with around 2% in average during 2000–2005 for OEMs, while other equipment manufacturers only spend around 0.14% (DOSM, 2009, own calculations).

Issues of volume, quality, high price, and dependence on technology suppliers for design have made these segments to be more vulnerable especially during crisis. The sector is also unable to compete with the counterpart, Thailand that has well established its parts and component manufacturing clusters.

The quality of the workforce is another pillar of industrial competitiveness. The auto manufacturing and assembly and the parts and components manufacturers generated nearly 50,000 jobs in 2008, with 24,310 and 24,249 employed in the motor vehicle and parts and accessories sub-sectors, respectively, and 6614 jobs in residual transport equipment.

Proton and Perodua have the largest share of workforce with nearly 70% of the total employment of motor vehicle manufacturers. The industry recorded 4.9% annual average growth rate of employment over the past eight years.

Relatively speaking the workforce is highly unionised (above 40%) in one industrial union and several enterprise unions (Wad, 2009b). Employers have no employers’ association and collective bargaining takes place at the company level.

Due to the past dependence on motor vehicle assembling and low technology applied, unskilled workers comprise of more than 80% of the workforce while skilled and semiskilled is around 5–7% (Table 3).

The tremendous gap in human resource recruitment and development has to be overcome if the industry attempts to create new advanced automotive technology cluster and enhance its product development. Automotive manufacturers have engaged in skill enrichment programmes, not least the national auto manufacturers.

For instance, Perodua’s application of the Japanese production standards and procedures requires improvements in human skills. In this aspect, employees receive various training in production control, welding, painting, trim and final maintenance, tooling, stamping and quality control (Rasiah, 2001; Mahidin and Kanageswary, 2004).

This has contributed to the development of skilled and semi-skilled workers. Although, Perodua and Proton undertake skill improvements programmes, in average, the industry still lacks the investment in training and employability of skill workers.

The training expenditure as a percentage of sales for both manufacturers of motor vehicles and other transport equipments is below 0.10%.