Automobile Industry History
The birth of the car as we know it today took several years and the works and developments of many people. It was not until 1885 that the first car rolled down the streets, however, earlier attempts at steam powered road vehicles were successful, giving people the idea that cars as we know them today have existed for a lot longer than they have. In the year 1769, a French engineer by namely Nicolas J. Cugnot invented the first automobile to run on the roads.
This automobile, was a self-powered, three-wheeled, military tractor that made the use of a steam engine. The range of the automobile was very brief and it could only run at a distance for fifteen minutes. In addition, these automobiles were not fit for the roads as the steam engines made them very heavy and large, and required ample of starting time. Oliver Evans was the first to design a steam engine driven automobile in the U. S. Then, a Scotsman, Robert Anderson, was the first to invent an electric carriage between 1832 and 1839.
However, Thomas Davenport of the U. S. A. and Scotsman Robert Davidson were among the first to invent more applicable automobiles, making use of non-rechargeable electric batteries in 1842. Development of roads made traveling comfortable and as a result, the short ranged, electric battery driven automobiles were no more the best option for traveling over longer distances. The Automobile Industry finally came of age with Henry Ford in 1914 for the bulk production of cars.
This lead to the development of the industry and it first begun in the assembly lines of his car factory. The several methods adopted by Ford, made the new invention popular among the rich. According the automobile industry US, dominated the automobile markets around the globe with no notable competitors. However, after the end of the Second World War in 1945, the automobile industry of other technologically advanced nations such as Japan and certain European nations gained momentum and within a very short period, beginning in the early 1980s, the U. S Automobile Industry was flooded with foreign automobile companies, especially those of Japan and Germany.
The current trends of the Global Automobile Industry reveal that in the developed countries the automobile industries are stagnating as a result of the drooping car markets, whereas the automobile industry in the developing nations, such as, India and Brazil, have been consistently registering higher growth rates every passing year for their flourishing domestic automobile markets.
The Growth Pattern
Automobile industry is the growing at an extraordinary speed in Asian region in the world, primarily due to a saturating automobile industry of western world. China, India, & ASEAN (Association of South-East Asian Nations) countries are the major driving markets for Asian automobile industry. The report “Asian Automobile Industry Outlook (2007-2011)” says that the low cost vehicles are driving the growth of automobile industry in promising economy, such as China & India. It offers huge opportunities for global players in these economies.
Besides those Asian countries, such as Thailand, Philippines, Indonesia, and Malaysia are expected to be the potential markets for automobiles due to AFTA (ASEAN Free Trade Area), this was told by our Malaysian prime minister Dato’ Sri Mohd Najib Tun Abdul Razak in the Renaissance Hotel, Kuala Lumpur, on the 7th march 2005, where he was giving speech on Malaysian automobile industry and AFTA. Moreover from long-term perspective, cheap financing and prices discounts, rising income levels, and infrastructure developments will drive the growth in majority of the Asian automobile market.
However poor infrastructure is affecting the growth pattern in Asian automobile industry for an example commercial vehicle dominates Indonesian and two wheelers Sri Lankan automobile market due to the poor roads. Nevertheless, hereby I have chosen to talk about our Malaysian automobile industry growth pattern and its development . In the 1960s, the Malaysian government encouraged the setting up of automobile meeting plants in Malaysia. The main objectives were to reduce the imports of completely built-up units (CBU) that will help to stabilize balance of payments, to create employment and to provide the base for transfer of technology.
In the 1970s, the “Local Content Policy” was promoted to enhance the development of local parts and components industry. The historical moment for the automobile industry was in 1985 when the first national car, Proton Saga, made its first appearance. Proton’s entry into the local automobile industry has restructured the industry from an assembly phase to manufacturing phase. In 1994, the second national car, Perodua Kancil made its introduction. The implementation of the national car projects was a step towards the development of an integrated motor vehicle industry.
The projects have contributed to the growth of the local component industry, as attested by the presence of 350 component manufacturers in Malaysia, of which 234 are Proton vendors and 135 are Perodua vendors. The national car projects had also attracted new car manufacturers to set up their manufacturing bases in Malaysia to enter the ASEAN markets, paving the way to support the nation’s industrialization programme. Currently, there are four national car manufacturers, ten non-national vehicle assemblers and three composite body sports car makers in Malaysia.
Renowned cars such as Mercedes, Honda, BMW, Ford, Volvo, Toyota and Hyundai are also being assembled locally. So far the automobile industry has succeeded in fulfilling the government’s industrialization efforts to enhance the country’s economy. The electronic and automobile industries have been the main medium for the development of the manufacturing sector over the years in Malaysia. The automobile industry has been a prominent double-digit contributor to the manufacturing sector. The automobile industry’s achievement of higher value added over the years was due to a remarkable increase in the production volume of the automobile industry.
The major the sub-industries within the automobile industries are the ship and boat building and repairing, manufacture of motor vehicle bodies, manufacture of automobile industry, manufacture and assembly of motor vehicle, manufacture of motor vehicles parts and accessories, manufacture and assembly of bicycles, tricycles, trishaws and their parts and accessories and manufacture and assembly of motorcycles and scooters. The manufacture and assembly of motor vehicle industry is the major contributor to the growth of the automobile industry, whereby Proton and Perodua are the major performers.
It is noted that, the manufacture of motor parts and components industry played a key role in the development of the automobile industry. This is due to the high demand by the foreign markets. Among the 350 component manufacturers in Malaysia, 40 of them are presently exporting their components to foreign markets.
The industry’s contribution to the Nation’s (Malaysia) economy
Firstly let’s have an overview on Malaysian automobile industry, as I did not mention earlier in the growth pattern because to know its contribution we need to know how it developed on the first place.
Therefore one of the key aspirations of Malaysia in its force to become an industrialized nation was the development of its automobile industry. Beginning with a single assembly plant in 1982, Malaysia now has a crowd of automobile related industries and is proud of its two primary automobile prodigies, Proton and Perodua. The establishment of Proton in 1982 and consequently Perodua in 1993 acted as catalysts to the development of the automobile sector. Subsequently, the Malaysian automobile components and parts industry also grew in response to the increasing demand for parts by the two major car manufactures.
This promoted the development of original technologies and local capabilities in line with the development of the foundation automobile industry. As a result of this growth, Malaysia is proud to be the only non-developed country in the world to have its own full automobile design and engineering capabilities which is no small achievement. The first expedition of Malaysia in fully entering the automobile industry began with the establishment of the first national car project, Perusahaan Otomobil Nasional (Proton) in 1983.
This marked an important objective to the development of the country’s automobile industry, not only in terms of the nation’s satisfaction, but also by proving that Malaysia now had a sufficiently advanced technological base to become a driving force in the automobile industry. The rapidity quickened, and soon the second national car project, Perusahaan Otomobil Kedua (Perodua) was launched in 1993. Malaysia also focused on the development of motorcycles and their associated systems, and by 1996, the national motorcycle project, Motorsikal Dan Enjin Nasional Sdn Bhd or MODENAS was born.
Malaysia is also active in the heavy vehicle industry, with companies such as the Malaysia Bus and Truck Sdn. Bhd, Deftech Sdn. Bhd and DRB Hicom providing heavy vehicles for both commercial and military use. These developments are very important to the nation, as they have not only set the base for which these industries to grow further, but have also fostered the growth of a wide network of local automobile components and parts manufacturers. Furthermore, in 2005 there are now six motor vehicle manufacturers and nine motor vehicle assemblers here in Malaysia.
There are also 10 motorcycle and scooter manufacturers all of which have a total installed capacity of over a million units per year. The automobile industry has also helped the economy through the generation of work opportunities, and in 2005, more than 57,400 jobs were generated by the automobile sector. It is worthy to note that this figure consist of only the new job opportunities created, and does not include the existing huge workforce that is already employed in the sector and other related downstream industries. Another important sector of the Malaysia automobile industry is the vendor or spin-off technology program.
In this sense, the volume of the Malaysia automobile sector consists of such vendors, each providing different components and services for the main assembly industries. Local vendors contribute up to 60 – 90 % of content in the vehicles made, while assemblers are able to achieve 30 – 60 % of local content in their assembled models. As of 2007, there are approximately 1129 vendors, with 248 vendors providing components directly for use by the industry while the remaining vendors providing support services and components for the primary vendors.
Currently, Proton and Ministry of International Trade and Industry (MITI) have taken steps to develop the vendor industry to create more level vendors. The first step taken is to reposition many of Proton’s activities onward to vendors. This serves two functions, firstly, it reduces the load placed on Proton and secondly it allows these vendors to develop themselves further. Currently, the Malaysian automobile industry is structured such that the major assembler contributes to almost 100 p%of the process of assembling the vehicle.
This includes styling, product planning, design, testing control of sources and manufacturing. However, under the current vendor development program, efforts are being made to slowly move away activities such as manufacturing, sourcing, assembly and testing to other companies, while Proton itself is responsible mostly for engineering design and styling. In order to achieve this, Proton and MITI have come up with the vendor development program. The strengthening of vendors will be taken in stages. Firstly, vendor rationalization will be carried out, to specialize and tier the vendors.
Subsequently, the vendors will undergo consolidation, where vendors will undergo mergers, joint ventures, equity participation programs and such. A final step will also be placed for vendors to exit the development program once they become strong enough to act as an assembler or manufacturer. Currently, the vendor development program put forward by Proton and MITI is a two-fold program. MITI will approach the program through the allocation of the RM 450 million Automobile Development Fund, and will cover M&A, tooling, productivity and export enhancement programs.
The second phase will be guided by Proton, and will cover the consolidation and rationalization of the vendors through mergers, participation in equities and joint ventures. Proton will also lead the development of the tier system for vendors and assist them in their specialization and will also create the necessary exit plan for them, with the total approach on vendor development will be carried out via vendor advancement programs and collaborations. The industry is over a century old with countless companies adapting to suitable market strategies and consumer environments.
As such, there is no doubt that with determination and drive, the Malaysian automobile industry will continue to flourish, regardless of the obstacles faced. With this I will like to attach some abstracts some of the points from the PVA International YB Tan Sri Nor Mohamed Yakcop,Minister of Finance II at Putra World Trade Centre, Kuala Lumpur about the automobile’s contribution. Which says that, “The Malaysian automobile industry has definitely come a long way since the early eighties.
Since the establishment of Proton in 1984, Malaysia has developed integrated capabilities in automobile manufacturing, which includes local design, and engineering capabilities, full scale manufacturing operations and extensive local participation in the supply of parts and components. To date, automobile manufacturers and assemblers have invested RM11 billion while automobile parts and component manufacturers have invested more than RM8 billion. We are proud to note that today, Malaysia is the only developing country in the world to have its own full automobile design and engineering capability.
Our sustained economic growth has also contributed to a significant increase in the demand for motor vehicles. New Total Industrial Vehicles (TIV) registrations over the last 10 years have increased from about 200,000 to the estimated registrations of 550,000 TIV in 2005. This is equivalent to about 30. 0 per cent of the total demand of the ASEAN 5 which is Indonesia, Malaysia, Philippines, Singapore and Thailand. The national car manufacturers have thus far been the primary beneficiaries of the higher domestic demand for motor vehicles. This in turn has supported the development of domestic automobile vendors supplying Proton and Perodua.
Today, we have 340 vendors supplying parts and components worth well over RM5. 0 billion compared to only 140 vendors supplying products worth RM2. 0 billion in 1994. Over the past 20 years, the national automobile industry has been a success firstly, as a contributor of economic value such as in terms of employment; secondly, as a base for national industrialization through developing indigenous design and engineering capabilities; and thirdly, as a sector with broad based Bumiputera participation across the value chain including manufacturing and distribution.
However, we cannot rest on the success of our achievements to date. The principal issue facing the domestic automobile industry is two-fold, being on one hand, the threat of greater competition and on the other hand, the need to improve competitiveness. The threat of greater competition arises from the trend towards greater liberalization and developments in the global automobile industry. The global automobile industry is subject to increasingly intense competition.
The slow growth in developed markets, weak financial performance and excess capacity, is leading vehicle manufacturers to aggressively rationalise to achieve even higher levels of scale. It is therefore no surprise that the trend of liberalization is accelerated with global car companies from developed nations seeking to gain market access in the fast growing Asian region. The trend towards increased liberalization in the automobile sector is unavoidable. However, commitments such as ASEAN Free Trade Area (AFTA) should be viewed more as an opportunity rather than a threat.
The premise of AFTA is that each of the ASEAN countries would be able to focus on a niche and leverage on the ASEAN wide regional market to achieve the necessary scale in order to be competitive. We cannot expect to be completely insulated from global developments. Increased competition is already reflected in the decline in market share of national manufacturers in recent years. There is an urgent need to address the competitiveness of domestic manufacturers and vendors, both in terms of costs and quality.
If this is not addressed, there is a very real danger of a downward spiral, whereby poor competitiveness leads to lower volume, which in turn weakens competitiveness and ultimately leads to the decline of the domestic automobile industry. ’’
The Foreign Direct Investment (FDI)
The Foreign Direct Investment (FDI) incentives in related to the industry and its relation to the government policies Incentives to attract foreign direct investment (FDI) into Malaysia are expected to be among the highlights of the upcoming Budget 2010.
It has always been our role to provide whatever necessary incentives to encourage the entry of FDI into the country. We are after all competing with other countries particularly in the region, for investments. But, be sure that goverment will ensure continuity in being competitive as an investment destination the government is committed to encouraging more FDI providing tax exemptions and the latest is the liberalization of 27 sub-sectors of the services industry. As to what specific new incentives the new budget has, it depends on our Prime Minister, Datuk Seri Najib Tun Razak.
The new National Automobile Policy (NAP) is expected to announce details of the review soon. The government is seeking a balance between imports and locally produced cars and Proton is the main concern. Anyhow it is, the government will take into consideration, the interest of all parties. As the country’s economy is directly linked to trading globally there was a need to uplift the local automobile industry, so that it provides a balance. When there is a downturn, the government can will be impacted directly. Therefore, by uplifting the automobile industry, government can balance off the trading activities.
The National Automobile Policy (NAP) of Malaysia Since the establishment of Proton in 1985, the Malaysian automobile sector has come a long way and has succeeded in developing included capabilities in the automobile industry. This includes a fully self-sustainable local design and styling capabilities, full scale manufacturing operations and wide-ranging local contribution in the supply of components.
The Malaysian market today is ASEAN’s largest passenger vehicle market, selling more than 500,000 vehicles yearly with 90% of those vehicles manufactured or assembled domestically. However, much of the country’s success in developing the domestic automobile industry has been facilitated by policies that have promoted local vehicle manufacturers. In the long term, these policies no longer serve as a benefit but now act as an obstacle to addressing global and domestic challenges, putting the sustainability of this industry at risk.
This, combined with vehicle manufacturers merging to achieve even higher levels of scale in response to the slow growth, value demolition and very big validation of the global automobile market, is placing serious doubts on the future of the automobile industry. Recognizing this new global environment, the National Automobile Policy (NAP) seeks to address the various issues and challenges and transform the domestic automobile sector to become a more practical, competitive and significant contributor to the economy.
The overall objective of the NAP is to create sustainable economic value creation in order to maximize the long term contribution of the automobile sector to the national economy, while at the same time benefiting the Malaysian consumer. The need to create economic value entails that the industry will continue to require supportive Government policies in order to become fully competitive internationally. The NAP therefore aims to facilitate the required revolution and optimal combination of the national industry into regional and global industry networks.
The importance of the transformation is determined by an increasingly liberalized and competitive global environment. Consequently, the Government has set out the following objectives for the national automobile sector, firstly is to promote a competitive and viable domestic automobile sector, in particular the national car manufacturers. Besides promote Malaysia as an automobile regional hub, focusing on niche areas and to promote a sustainable level of economic value added and enhance domestic capabilities.
Moreover to promote a higher level of exports of vehicles as well as components and parts that is competitive in the global markets. In addition to promote competitive and wide based Bumiputera participation in the domestic automobile sector and to safeguard the interests of consumers in terms of value for money, safety and quality of products and services In order to achieve these objectives, the government has taken a number of steps or rather policy thrusts.
The first of such thrusts is the condition of Government support and incentive based on sustainable economic contribution. Such Government support and incentives will be aimed at optimizing sustainable economic contribution, namely the scale of operations, extent of industry linkages, and the development of local and Bumiputera capabilities. The government will also support the increase of scale to enhance competitiveness, in order to create a leaner and more sustainable industry structure.
At the same time, the government will also promote the development of strategic linkages with international partners. The Government will encourage industry participants to collaborate with external parties to establish strategic tie-ups, as they will not only be able to share scales and resources but also open up opportunities and provide access for domestic industry participants to enter the global automobile supply chain and vice versa.
Furthermore, such strategic tie-ups also require domestic industry participants to adopt best practice management, processes and procedures to deliver on higher quality standards that are necessary in accessing international markets. Finally the Government also intends for Malaysia to become a regional hub focusing on niche areas and corresponding activities. By positioning Malaysia as a regional manufacturing and assembly hub by encouraging existing participants to make deeper their commitment in Malaysia.
Additionally, a number of specific policy instruments have also been put into place by the Government for the NAP. These policy instruments include excising the duty structure, gazette the values of imported cars, implementing an ASEAN import duty, providing for an industrial adjustment fund, issuing manufacturing licences and approved permits and finally streamlining vehicle type approval.
As a result of the implementation of these policy measures, the Government expects to see an industry with two strong national vehicle manufacturers, complemented by a number of foreign vehicle manufacturers potentially with local joint-venture partners who will upscale their assembly operations and at the same time rationalize the models assembled, to drive sustainable industry linkage. The government also expects to see the components sector becoming more possible there will be fewer companies but their volumes will be higher and more networked into the global automobile industry.
Regular liberalization will lead to reduced scope for importers, but valid distributors will benefit from the increased sales volumes. In this way, the NAP aims to provide a clear direction for all industry participants to enable them to make the optimal plans and investment decisions for the future. Any Government policies and measures introduced for the domestic automobile sector will be based on this NAP. The NAP will be a long term policy base for the domestic automobile sector subject to reviews and modification dictated by the global automobile industry environment.
The regulatory bodies of PROTON, Malaysia Policies regarding vehicle emission, the environment and fuel economy are extensive and subject to frequent changes and scrutiny. Complying with this regulation requires extensive cost and effort. Therefore, in order to proactively anticipate any changes in regulatory requirements, domestic and abroad, the Group monitors this development to anticipate foreseeable requirements for future product development.
As the company progresses towards international exposure, Proton is faced with many risks relating to disclosure of intellectual property especially inconnection to licensing of IPR(intellectual property rights) in strategic projects. Appropriate measures are currently being taken in managing all aspects of IPR by establishing an IPR policy and issuing manuals for identification, protection and commercialisation of IPR. This effort will significantly bring maximum benefit to the organisation by return on investments and profits in the form of payment for licensing and royalties and at the same time the IPR’s are duly protected.
As a conclusion or as the overall view on the automobile industry today compared to those times, we can see that this industry has grown up tremendously together with the technologies available. The automobiles do not create cars to be drive on the roads but also in the space, air, sea and also in the railways. They develop as time goes with creative ideas and even designs. The industry and area of commerce in which automobile models are planned, designed, manufactured, and marketed.
The automobile industry is concerned with profits and competition; with consumer demands for styling, safety, and efficiency; and with labor relations and manufacturing efficiency. This industry started with a steam-powered vehicle . Then electric automobiles with internal combustion engines Then in the Veteran era Then Brass or Edwardian era Then Vintage era Then Pre-WWII era Then Post-war era Then Modern era And the last is the nowadays car and the future cars The above shows the eras that the automobiles come through till today. We can see from just a steam car till to the automatic computer cars show the development of automobile industry. This industry has its manufactures around the world and their automobiles also are exported around the world.
However this automobile do have its advantages and disadvantages, whereby the do make life easier for the people by coming out with new technologies but at the same time it pollutes the environment wit its gases and also the consumption of the technologies, like for an example the usage of high radioactive power may lead to global warming.
Therefore this industry has its future plans whereby they conclude people now have access to the best in terms of home appliances, offices and automobiles. Digital components have made life very easy for individuals. Things that were expensive at a time are now available within our budgets, and automobiles are one of those. There are certain situations that have bought sudden changes in the automotive industry. Unstable financial markets, rising fuel prices, and increasing taxes are some of the problems faced by the automobile industry.
Automobile users have not changed their approach towards purchasing fuel and petrol despite the growing fuel prices. Environmental issues are not important for auto users. They are unaffected by the rising fuel costs and are prepared to continue driving. Car manufacturers and dealers have seen a marginal loss in the sales of vehicles. There is an increase in used car sales and decrease in new car sales. Sales of automobiles are on the rise via the Internet. Manufacturers have to switch to the World Wide Web medium to increase the sales. Hence, there is going to be a massive increase in vehicle taxes, toll and parking charges. There is an immediate need to find an alternative to road use with a reliable and clean public transport.
While the government is trying its best, insurance companies are stable and earning a lot because of the competition in the automobile industry. Electronic devices have played a vita role in the automobile industry. There are huge numbers of electronic devices installed in automobile manufacturing plants. For example, cars are using electronic devices. Thus, listening to music in automobiles without interruption is just one of its kinds to explain the impact of electronics in the automobile industry. Telecommunication has also played a major role in the automotive industry. In recent times, this industry has been gaining more attention from car manufacturers. An average automobile manufacturing company spends thousands of dollars on electronic devices for every vehicle.
Increase in using electronic devices in automobiles is reflected in the form of entertainment systems, security features and safety devices. Some of the common electronic devices used in automobiles are: 1. Controlled Area Network: There are separate computers fitted in the vehicle.
The Controlled Area Network allows these computers to communicate with one another. 2. Fuel efficiency: The rising prices of fuel have forced the automotive industry to manufacture fuel-efficient automobiles. New technology in automobiles has a unique function to switch between fuel and electronic engines. As prices of fuel have increased, there is an increasing need to switch on alternate sources of fuel. Water is one best source of energy. Researchers have proved that water can run cars.
Scientists also claim that energy extracted from water can be used instead of fuel. Water mixed with normal gasoline is another alternate solution. Automobile industry is trying hard to discover other technologies for reducing all these costs.
- http://en. wikipedia. org/wiki/History_of_the_automobile
- http://www. automobileindia. com/indiaautomotive/automotive-technology. html
- http://wapedia. mobi/en/Big_Three_%28automobile_manufacturers%29
- http://en. wikipedia. org/wiki/Automotive_industry
- http://www. conservapedia. com/Automobile
- http://www. wikinvest. com/stock/General_Motors_(GMGMQ)
- http://en. wikipedia. org/wiki/IPR http://protonmotorsports. wordpress. com/