The automotive industry in Malaysia is one of the most of import and strategic industry in the development of Malaysia’s economic system and transforming Malaysia into industrialised state. Malaysia has four national car industries ; they are Perusahaan Otomobile Nasional Bhd, known as Proton, Perusahaan Otomobile Kedua Berhad ( Perodua ) , NAZA, and DBR-HICOM.
These car companies are playing of import function in the supplying the chances of employment, upgrading the development of engineerings and industrial accomplishment within the car fabrication industry and bettering strengthen of international fight of Malaysia. All of these was purpose to cut down the country’ trust on foreign made import merchandises.In the early of 1980s, the former Malaysia Prime Minister, Tun Dr Mahathir Mohamed dreamed to has Malaysia national auto which manufactured by Malayan but cipher believed and thought he could. However, he sought a spouse with an established car shaper.
During the visiting to the state by executives from Japan Mitsubishi Corporation in twelvemonth 1981, Tun Dr Mahathir Mohamed proposed the creative activity of a joint venture to bring forth Mitsubishi designed car in Malaysia.Then, Perusahaan Otomobil Nasional Bhd ( Proton ) was officially launched in May 1983 ; building began on company’s fabrication installations where located at industrial country of Shah Alam and completed in yaer 1984, the works which used bulk of manual labour production techniques can bring forth 80 thousand autos yearly ( Perusahaan otomobil Nasional Bhd-Company History ) .In July 1985, Proton used the tiger as trade name symbols and launched the first auto, Proton Saga, which is the theoretical account base on Mitsubishi Lancer. After 15 old ages of expertness development, Proton produced it foremost in house theoretical account auto, Proton Waja, which design and technology were utilizing ain engineering and expertness.
Since the constitution of Proton in 1985, Malaysia had succeeded in developing incorporate capablenesss in the domestic car industry, which include local design and styling capableness, full graduated table fabrication operations and extended local engagement in the supply of constituents. Proton is a Government Link Company, every bit known as GLC. So, Malaysia authorities wants a strong domestic car industry until it can go internationally competitory such as Honda and Toyota in Japan.Malaysia authorities has persisted in protecting its car industry, a national car policy has made by intervened and imposed import revenue enhancement or responsibility on foreign auto from one hundred 40 per centum to three hundred per centum ( Chee.
2003 ) . The revenue enhancement and responsibility are trade barriers and the revenue enhancement agenda is really complex. The completed import responsibility is shown in appendix ( a ) . The import responsibility construction has caused in an overall increasing by revenue enhancement rate on most motor vehicles and the revenue enhancement is depending to the different classs of motor vehicles.
For illustration, different auto from different classs and different engine capacities have different import responsibilities. The more luxury of auto type and larger of engine capacity will revenue enhancement higher. This revenue enhancement construction will advance greater transparence in pricing. Malaysia authorities believed that this national will be a cardinal step towards driving the transmutation of the domestic car industry to go feasible and competitory than others.
Not merely that, Malaysia authorities besides intends to enforce the particular licence known as sanctioned license ( AP ) and make anew sort of protective step such as freezing on the import of new trade name of car. The momism of the Malaysia authorities to Proton has caused many job to national car industries’ development, on the other manus, liberalisation to domestic car market is believed will profit to all industrial participants, domestic consumers and the Malaysia economic system.Momism causes jobs Proton was born into a well environment which design to protect it through its babyhood and raising into a company, meanwhile, Proton are able to develop its technology capablenesss so that it could go one of a smattering of auto shaper which can construct a auto from abrasion ( Leela. 2007 ) .
In fact, the overprotected to Proton has caused the Proton growing become easy from the last 20 two old ages and still can non vie to even other domestic car companies such as Naza and besides foreign auto shapers such as Kia from Korean and Honda from Japan.Proton held the major domestic market portion because Proton has long enjoyed protective trade barriers in its domestic car market. The entire sale of Proton was 155,419 units of auto during the first half of the twelvemonth 2007. Proton was one time the market leader in the Malaysia automotive market and used to command about 60 per centum of the market portion in twelvemonth 2002, but Proton merely has twenty three per centum presently in domestic market portion ( Shanmugam.
2007 ) .In the twelvemonth 2002 it was estimated that Proton dominated the Malayan auto market by accounting for 60 pecent of local auto demand ; nevertheless, market portion of the Proton has been worsening as auto imports start occupying and snarling off domestic market portion from the auto maker after twelvemonth 2002 ( Siow.2007 ) . High contrast in comparing between twelvemonth 2002 and twelvemonth 2006, Proton merely commanded 30 per centum of the domestic market portion ; Proton in domestic market portion fell from 30 eight per centum in twelvemonth 2005 to thirty three per centum in 2006 ( Leela.
2007 ) .However, the unfriendly revenue enhancement construction takes off the benefit of liberalisation. Foreign car shapers and investors are fear because they needs just trade. Another factor that foreign car shapers and investors worry is the hold to put up the new revenue enhancement construction for assembled or imported vehicles.
The late and deficiency of information make foreign car shapers stop to spread out their investing.Car makers, assembly programs every bit good as franchise holders need so much information about new national car policies of authorities to do proper programs to the market alteration, particularly those related new merchandises, local assembly plans, and demand of market.Even though foreign car shaper and investors know that the revenue enhancements among the ASEAN made autos will be no more than five per centum, but they still need to cognize what sort of revenue enhancements they may hold to pay and how to pay. They besides concern about the new revenue enhancement construction will do the adversity to do them less competitory advantages.
What is the AFTA The Association of Southeast Asiatic Nations or ASEAN was established on 8 August 1967 in Bangkok by the five original Member Countries. The member states are Indonesia, Malaysia, Philippines, Singapore, and Thailand. Brunei Darussalam joined on 8 January 1984, Vietnam on 28 July 1995, Laos and Myanmar on 23 July 1997, and Cambodia on 30 April 1999 ( About ASEAN. 2007 ) .
Since the early of the 1990s, the ASEAN states have armed themselves against a figure of alterations in the international environment, which were perceived as a menace. Among these alterations can worsen in foreign investing in the ASEAN states.The ASEAN states, which have purpose and lead to extremist decreases of trade limitations, to increase gait and transforming efficaciously in industrialisation among the ASEAN states, the portion of manufactured exports was lifting and an addition in intra-industry trade was besides experienced ( Naya et al, 2002 ) .AFTA is a short signifier of ASEAN Free Trade Agreement and it was set up in twelvemonth 2002.
AFTA is a corporate attempt by ASEAN member states to cut down or to extinguish duty or barrier on intra ASEAN trade. The intent of AFTA was to develop greater trade and industrial linkages among these 10s of ASEAN member states. Because of the combination of high population among ASEAN member states can supply high potency and stimulation of greater economic coaction ( About AFTA. 2007 ) .
With the purpose of the liberalisation of intra-ASEAN trade, AFTA is running the chief entrustment which is a strategy called Common Effective Tariff ( CEPT ) . This CEPT of AFTA purpose to the import responsibilities among ASEAN member states will be reduced to between zero per centum to maximum five per centum by full execution of AFTA in twelvemonth 2010.The AFTA besides want to extinguish other non duty barrier and the quantitative limitation such as import license, approved license or quota among the ASEAN member states. Under the CEPT, the progressive transportation of merchandises will establish on each ASEAN member’s capacity and capableness ( Trade under CEPT.
2007 ) .Meanwhile, Malaysia authorities must cut down the import revenue enhancement or responsibility to maximum five per centum on the CKD autos from ASEAN member states. There are two type of new car are be classified in the universe, CKD and CBU. CKD is a short signifier of wholly knocked-down ; the CKD car is some constituent parts and accoutrements that are sourced domestically.
On the other manus, CBU is a short signifier of Wholly Built Up, which the car is to the full import and wholly built in other counties or out of ASEAN member states.Harmonizing to the day-to-day express, the CKD car which is imported from ASEAN member states is no require to pay or bear down import responsibility, in contrast, the CKD car which imported from non ASEAN member states is require to pay zero per centum to maximum 30 per centum. The CBU car which is import from ASEAN member states is merely require to pay zero per centum to maximum 20 per centum and CBU car which imported from non ASEAN member states is require to pay minimal 30 per centum to maximum 50 per centum ( Auto: Import Duty Down.2004 ) .
Comparing and analysis to overall new system, the car import revenue enhancement will hold greatest alteration. The overall revenue enhancements will be lowered from the scope of 80 per centum to three hundred per centum presently change to maximum 50 per centum. In truth, Malaysia as a portion of the AFTA understanding, the import responsibilities should be lowered and trade barriers should be eliminated in twelvemonth 2003, but Malaysia was managed to negociate a delay from twelvemonth 2003 postpone to twelvemonth 2005, and secondly postpone to twelvemonth 2008.Liberalization bring benefit Liberalization to domestic car market to fit AFTA can supply a clear and crystalline way to all of industrial participants and straight enable them to do the optimum programs and investing determination for the hereafter.
Then, foreign auto shapers may desire to bask the benefit from AFTA and put up their car workss in Malaysia whichever fabrication and collection.Beside the benefit of AFTA, more and more foreign investors will be attracted to put or spread out their concerns in Malaya after the liberalisation because of the stableness of Malaysia politic, good substructure, and largest car market among ASEAN.Harmonizing to the Malaysian Automotive Association president, Datuk Aishah Ahmad, the Malayan car industry participants must look at the chances of AFTA that will originate and supply to profit all ASEAN member states, the bulk of local car industry participants are presently tied with Nipponese makers ( Khong. 2005 ) .
Malaya may believe the AFTA is a menace to domestic car industries but it is an chance to many Malaysian car companies. They can really negociate with foreign giants to put in Malaysia and open up a joint venture company. With joint venture it would be a two win state of affairs where both local and foreign companies can profit from the undertaking. For illustrations, the Honda Motor Corporation merely formed a joint venture undertaking with DRB-HICOM and Oriental Industries in July 2000.
Both local companies have 51 per centum portion while HONDA has 49 per centum. DRB-HICOM is really a domestic and parent company for Proton. They have formed an confederation with HONDA so that they are non out of the auto industry ( The upcoming challenges to the Malayan automotive industry. 2007 ) .
This is considered a good move because this joint venture undertaking will profit all parties involved. Malaysia authorities can believe that some other companies will follow this footfall to organize a joint venture company with other good choice car giants like Toyota, Ford, Volvo and others. If Malayan car companies ne’er offer themselves, so other ASEAN member states merely like Thailand or Vietnam will catch these chances of joint venture undertakings and derive most from AFTA.The liberalisation of domestic car market will do of creative activity of spin off industries such as services, car parts, car accoutrement, telecommunications, and many others.
Malayan car companies will besides profit from engineering transportation and may hold an increased function to play in regional and planetary car portion supply ironss.Consequently, these constituents sectors will go feasible. Their concern volume will be higher and more networked into the planetary car industry. Liberalization will take to cut down range for import of the car constituents, but echt distributers will profit from the increased of gross revenues volume.
It is a manner for working o bend Malaysia into hub for car industry.The higher degrees of foreign direct investing which may be generated are expected to interpret into greater bipartisan trade and Malaysia’s economic system should see an enlargement. Economic enlargement should take to the creative activity of more and better paying occupations for both states.Decision In decision, my first sentiment is the Proton has already started fixing for AFTA, but it may no plenty to confront the impact of liberalisation.
Gross saless will be projected to drop clearly for Proton after AFTA is implemented. One of the steps key taken by Proton is in research and development sector.Although they have come up with first Malayan design auto which is a milepost in Proton, but Proton must besides making research and development with Lotus technology and Petronas-Sauber Formula 1 squad to come up with ain engine. The research and development sector is really of import for car industry.
After that, Proton can demo their ain individuality to the universe instead than copying paradigm of Mitsubishi autos.Second, local car makers and assembly programs have to come with their ain individuality or trade name if they want to perforate the ASEAN market. In order to hold ain individuality, they need to come out with their ain theoretical account that is non available from other car makers. Third, all car companies should be taken action is cost fight.
Cost control is really of import. Our local autos cost is really high comparison to the existent monetary value of foreign auto without revenue enhancement and duties. Even though many Malaysia urged Proton to cut cost of the local production if they want to be planetary distributer than their monetary value should be competitory among auto giants.Even though the Proton’s capacity is little comparison to other auto giants, but if they want to dispute them so they have to cut the cost.
Proton has informed that the new theoretical account Proton WAJA parts are 90 per centum locally made. This is a good mark for local portion makers. However are the local parts cheap compare to foreign providers. However they should acquire alternate pick to cut down cost.
Possibly they can purchase some parts from other states that are significantly inexpensive comparison to local parts.Another chief thing that Proton should see is quality of the auto and its parts. Presently the proton auto quality is non every bit good as foreign autos. So how does Proton traveling to travel planetary? Quality is really of import because most consumers will look into the quality of the auto before buying them.
They should improvize their quality of auto. They should be strict in quality control. Even to keep the local gross revenues, Proton has to keep the quality and upgrade them to be higher than foreign autos. Proton auto proprietors knew the quality of Proton autos before they buy the auto.
They did n’t see the quality because the cost was more of import to them since Proton and Perodua was the cheapest auto. Before perforating other ASEAN states, local makers have to make a well planned selling scheme to sell the auto in the ASEAN part. They should come up with some partnership in these ASEAN states to market their autos. Local distributers in ASEAN states are more dependable and trustable since they know their market good.
The coaction should be heightening the selling scheme and method to perforate this ASEAN part.Promote strategic linkages with international spouses is of import. Scale and focal points are necessary to accomplish greater fight but in themselves, they are non sufficient. In add-on, planetary best patterns and industry linkage are other of import cardinal success factors for the car industry.
Therefore, the Government will go on to promote industry participants to join forces with external parties to set up strategic affiliations.Apart from sharing graduated table and resources, such strategic affiliations open up chances and supply entree for domestic industry participants to come in the planetary car supply concatenation. Furthermore, such strategic affiliations besides allow domestic industry participants to follow best pattern direction, procedures and processs to present on higher quality criterions that are necessary in accessing international markets. Finally, I want to advert that subsequently is ever better than ne’er.
