Charging ahead: Malaysia’s EEV aspirations

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Last month, Honda Malaysia launched its RM382 million production line for hybrid cars in its Pegoh plant located within the Alor Gajah district of Melaka. This second line will be both Honda’s and the country’s first hybrid facility, which will produce hybrid cars for the ASEAN market as well as Australia and New Zealand (photo credit: Honda Malaysia)

Last month, Honda Malaysia launched its RM382 million production line for hybrid cars in its Pegoh plant located within the Alor Gajah district of Melaka. This second line will be both Honda’s and the country’s first hybrid facility, which will produce hybrid cars for the ASEAN market as well as Australia and New Zealand (photo credit: Honda Malaysia)

By T.K. Tamby

The long-awaited National Automotive Policy (NAP) 2014, which was finally revealed in January, held little surprise for industry watchers. As expected, it reaffirms the government’s focus on making Malaysia an Energy Efficient Vehicle (EEV) hub in the region. However, critics claim the proposal has come a bit too late and that even generous incentives will not be enough to draw big players to a small market like ours.

Since the year 2000, Thailand, and later Indonesia took the opportunity to lure major auto manufacturers with their huge domestic markets and liberal investment policies. While they capitalised on auto players wanting a piece of the fast-growing ASEAN market –  with a total population of almost 600 million people and GDP of US$1,858.7 billion (approximately RM6 billion) – Malaysia, which was pushing for the development of its national automotive industry, adopted a rather ambivalent approach towards liberalisation, thus losing out on auto investments.

“It is a complicated situation; we have an entire industry hinged on the wellbeing of national brand like Proton, and letting go of protection all together would unleash a chain of disastrous effects throughout the in industry,” said a veteran automotive businessman, who spoke on the condition of anonymity.

He said Malaysia acted no differently than many other countries when it came to protecting its indigenous industries. “It is a tough balancing act between attracting new investments and safe guarding its home-based industries.”

Liberalisation, said Business Consulting firm Frost and Sullivan, should not be disruptive and at the expense of national interest.

Late to the party

Still, it’s not too late for Malaysia to try for a slice of the pie. To this end, the government has wisely decided against competing head-on with its neighbours. Becoming an EEV hub allows Malaysia to stand out in the crowd of mass producers, while creating a route to regain regional leadership in the auto industry.

Malaysia’s relatively small domestic market as opposed to Thailand or Indonesia’s does not have to be a hindrance. In fact, the size of the domestic market need not be the only determining factor in attracting automakers when you have the entire ASEAN market at your door step.

Besides, the eventual convergence of ASEAN into a single market makes the size of the domestic market irrelevant. What Malaysia lacks in size, is mitigated by its influence in the region, its unwavering commitment to the development of the automotive industry and its seamless infrastructure, which encompasses the entire automotive ecosystem.

The EEV is not a new proposition in the automotive industry, and has struggled to get a foothold in the petrol-driven auto market for the past two decades. Despite numerous governmental incentives worldwide, cheaper prices, stricter emission control laws and the touted benefits of going electric, EEVs have always been on the periphery, unable to win over the mainstream masses globally. Often labelled as an environmental alternative, they never grew to be a worthy competitor to the internal combustion engine-run vehicles, which were perceived to be cheaper, more powerful, convenient, and more importantly, had greater range.

Needing a push

In truth, the EEV may not be getting the push it deserves to break into the mainstream, pass all the hype and perception. Malaysia, fighting to regain leadership position in the regional automotive sector by trying to become an EEV hub, may be able to do this with sufficient political will coupled with dogged determination.

This is because the very survival of an EEV hub hinges on how these vehicles compete with conventional ones for regional market share. The idea of a bigger market for something manufacturers consider a niche product would most definitely draw auto players to the hub.

Despite the lacklustre sales and challenges in battery supply, manufacturers are not turning away from the electric vehicle given all its benefits. With ever tightening emission regulations, and the rising cost of petrol and diesel, not to mention the impact of exhaust emissions on global warming, it’s no wonder that countries in Europe, Japan and some US states such as California are embracing EEVs.

Apart from Nissan, Toyota and Tesla, others who are investing in the electric dream include General Motors, which is developing a cheaper vehicle that can go up to 200 miles on a single charge, BMW, Volkswagen, Audi and Mercedes.

Batteries, the current millstone of the EEV industry, are said to become cheaper due to advances in technology. Prices can also be pushed down once there is sufficient competition in the supply chain due to increase in the number of battery manufacturers. This will happen once the EEV goes mainstream and attains greater market share.

Seven-year target

Malaysia aspires to achieve the status of regional EEV hub by 2020, encompassing the entirety of the automotive value chain, said International Trade and Industry Minister Datuk Seri Mustapa Mohamed, giving the country less than seven years to achieve this deadline. Without a doubt, this calls for constant, aggressive as well as coherent policies and initiatives that go beyond the current incentives set out in the recent and past National Automotive Policies.

Initiatives would have to include the need for both the Government and the manufacturers to invest ahead of demand to ensure that infrastructure is readily available when demand matures. Investments include research and development, charging stations, the supply and distribution chain as well as aggressive marketing efforts. This could be pursued via further incentives, public- private joint ventures and tie in with technology partners.

Though the task seems almost Herculean, it is not impossible, especially if there is constant and concerted effort by both the Government and private sector. We have almost everything for the making of an effective EEV hub for ASEAN – the region’s most conducive business environment, an almost seamless automotive eco-system, a huge market at our doorstep and the political will to make it happen.

And to start the ball rolling, last month Honda Malaysia launched its RM382 million production line for hybrid cars in its Pegoh plant located within the Alor Gajah district of Melaka.. This second line will be both Honda’s and the country’s first hybrid facility, which will produce hybrid cars for the ASEAN market as well as Australia and New Zealand.

This will hopefully spur other hybrid auto manufacturers such as Toyota, whose Prius (pic – photo credit: Toyota Malaysia) is one of the most successful (in terms of sales) vehicles in the market, to consider a similar move.

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