Don’t blow our place in the global component supply chain

 

Malaysia’s position in the global supply chain as an automotive component hub, with export revenue of RM13.7 billion, is under threat as Covid-19 lockdowns have disrupted production.

Car plants in Thailand, Indonesia, Vietnam, Japan, the US and Brazil face an imminent shortage of Malaysian-made parts such as mirrors, air-conditioning compressors, lenses and lights.

A Malaysian who owns one of the largest groups of automotive component makers in Thailand, told FMT: “Don’t delay starting production and supplying international customers. Investors can move their production to another country in three months if they think that a supplier nation is not reliable.”

Yeap Swee Chuan, the Bangkok-based founder of Aapico Hitech Public Company Ltd, said: “Malaysia should protect its status as a reliable partner and must not fail its overseas customers. In Thailand, all our manufacturing plants are open and some are on 24-hour shifts; we had record sales last year.”

While automotive component manufacturing is not as glamorous as a car factory, these manufacturers employ part of the 700,000 workers in the total automotive ecosystem and add more value in terms of export revenue compared to exports of cars from Malaysia.

Malaysia is already a reasonably successful manufacturer of automotive components. Export earnings trebled from RM4.7 billion in 2014 to RM13.7 billion in 2019. In the first quarter this year, it notched RM4 billion before MCO 3.0.

As recently as last week, Adient Automotive Seating in Melaka started to export headrests to Thailand and Indonesia from its new RM10 million line as part of the company’s strategy to make Malaysia a regional parts hub in Southeast Asia.

The automotive component manufacturing industry has been nurtured by the Malaysia Automotive, Robotics and Internet of Things Institute (MARii) from its infancy to its current position.

Set up as an agency under the international trade and industry ministry both as a think tank for auto policy and as a provider of common facilities for component makers, MARii has over the years established a simulation and engineering centre, a Rapid Prototyping Centre, and an Academy of Technology.

“Small component vendors can’t afford to have the equipment to do rapid prototyping and simulation engineering to bid for international automotive component supplies. This is where MARii invested in common facilities for the up-and-coming automotive component vendors,” said MARii CEO, Madani Sahari.

“We work closely with the government to share the costs of investing in such infrastructure to support the automotive component industry, and this has to be sustainable. While we’re constituted as a non-profit organisation, we still have to collect some fees to cover the operational expenses including the salaries of staff who are employed at the common facilities,” Madani told FMT.

There was a deep well of discontent about the National Automotive Policy in the sense that the policy is outdated regarding electric vehicles (EVs). However, the latest revision of the policy in 2020 outlined a clearer direction regarding next generation vehicles, in which EVs are included in the policy.

As the automotive industry remains a strategic sector, the policy has evolved from protective policies to gradually level the field. It should be noted that MARii was founded as the Malaysian Automotive Institute in 2010 to seek a solution out of heavy reliance on protectionist policies since the industry started.

Unfortunately, the Covid-19 pandemic has distracted their attention and MARii is a convenient lightning rod for Malaysians who are disappointed by the country’s lack of pace in the EV sector compared to Thailand and Indonesia. Vietnam even has a home-grown automaker, Vinfast, which has launched three versions of its EV passenger car.

Social media flared up last week over the discovery that a MARii project on Covid-19 data analytics has as its consultant a deregistered medical doctor, placing the agency in a conflict of interest position.

We polled six franchise holders representing the world’s top four car-making countries for their opinion of MARii in terms of adding value to the auto industry. Three didn’t respond.

Some comments:

• Of course MARii adds value to the industry. It advises government legislators and being an independent body, is not biased in its view to any particular brand interest. Its sole responsibility is to research global automotive trends and consumption trends towards effective, efficient and environmentally sustainable mobility technology. Lead the government agencies and legislators towards this direction. The auto industry has an extensive social economic impact. That’s why for years it was a serious point of contention in our AFTA scheme. You need a dedicated group of professionally trained people to do this research and recommend a direction to the government on automotive policies.
• MARii has neither the strategic smarts nor the operational experience.
• MARii is a good institute but it must re-chart its course and objectives. They don’t have a feel of the ground. They must understand the current pains of the industry. You make an application and wait for six to eight months. There’s no sense of urgency. MARii should be a bridge between auto players and the government. Like how Rafidah (Aziz) engaged with the industry. Since the automotive industry is such a tariff-regulated business, why not place MARii under the finance ministry. For instance, the Automotive Business Development Council – a round table of civil servants from JPJ, Customs, MoF, MARii and Mida with Miti as the secretariat – decides on automotive business applications but it refers these decisions to MoF for the final approval. Why doesn’t the government include a private sector representative such as the Malaysian International Chamber of Commerce and Industry or one of the big four accounting firms to give the civil servants a feel of what’s happening on the ground?

On that note, perhaps MARii will be more inclusive and in a formal setting with a board of advisors with representatives from the world’s top carmakers from Japan, China, South Korea, an EV specialist from Tenaga Nasional Bhd and a telecommunications 5G specialist from Telekom Malaysia. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.