Thailand built cars differently to Malaysia, and cleverer

TMI - Should we reinstate a new national car agenda?:

by Dr Amir F.N. Abdul-Manan is a transportation energy, technology and policy researcher, currently living outside of Malaysia

A RECENT newsflash implied a possible return to the era of Proton 2.0. It is no secret that many Malaysians believe that the automotive policy did not achieve the intended outcomes and in some cases even led to unintended consequences.

To date, many of the middle and working class continue to harbour ill-feelings towards the national car agenda, particularly as they were the ones most directly impacted by the policy.

It is time that we face reality, the protectionist measures that were put in place, including the high tariffs on imported cars, are perceived to have done more harm than good to the nation.

The price we had to pay for a non-premium car, including the interests paid for a nine-year loan, could have easily bought us a small low-cost apartment just outside of the city – which, economically speaking, is a much sounder financial investment compared to the purchase of a depreciating asset like a car.

And with subsidies for fuels gradually being removed, many Malaysians were left with limited options – we could neither afford to change to a more efficient car, nor could we depend on our underdeveloped public transport system.

Caught between a rock and a hard place, many were inundated with this unnecessary financial burden, thus reducing our overall purchasing power.

Year after year, we see that car loans are one of the top reasons for bankruptcy in the country, affecting about 5,000 individuals annually. Sure, financial illiteracy is partly to be blamed, but let’s not absolve ourselves from the responsibility of coming up with better, holistic policies.

Understandably, we need to find ways to generate the economy, improve employment opportunities and develop local engineering talents in this new Malaysia.

But there are many other ways to achieve those goals without having to embark on another large scale, and costly national car project. 

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Consider Thailand, also sometimes dubbed as “Detroit of Southeast Asia”, as an example of a successful automotive hub in the Asean region, and once ranked top 10 producers in the world.

Like Malaysia, Thailand introduced their national automotive policies around the 1980s. But unlike Malaysia, they had taken a different path.

While we chose the path of developing a national car company, Thailand decided to liberalise its automotive industry to attract foreign investments.

Over the decades, Thailand witnessed multinational automotive manufacturers set up plants in the country, expand their supply chain base, and establish regional production centres as export hubs to serve the growing demands for automobiles regionally and worldwide.

Today, Thailand produces almost two million vehicles in total, whereas we only produce about 500,000 units annually. Thailand has been extremely successful in developing its automotive industry, and in hindsight it can be argued that this is largely because they didn’t have a national car, which meant that there were no policies in place to protect domestic manufacturers at the expense of foreign investors.

The level playing field created a thriving ecosystem of manufacturers and assemblers, including major names like BMW, Ford, Honda, Mazda, Mitsubishi, Nissan and Toyota.

That being said, there are other late comers that have taken similar routes as Malaysia in developing national cars but with more successful outcomes.

South Korea is a case in point with their internationally renowned Hyundai and KIA brands. The Korean automotive industry went through four phases – mastery of production capabilities, local content production, export orientation and technological independence.

On the surface, Proton appears to have gone through similar phases but unfortunately, hasn’t attained similar feats. 

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Hyundai is well-known to perform arms-length deals with suppliers to ensure cost competitiveness, and at the same time they are sticklers to quality manufacturing which helps build its reputation.

The company has invested heavily in the expansion of its global R&D network in order to be technologically independent by leveraging on global expertise. Today, Hyundai maintains about eight R&D and design centres globally to tap into the regional innovation eco-systems.

And at the same time, it brings its researchers closer to key global markets which gives them the ability to respond quickly to shifting consumer demands. In a short 30-year period, Hyundai managed to overcome the obstacles that are typically associated with a late-market entrant – issues such as lack of resources, knowledge and capabilities.

China, on the other hand, has only recently become more prominent in the global automotive scene. But unlike Malaysia, it has a much larger economy and therefore, its domestic consumption is more than enough to fuel its automotive aspiration.

The Chinese industrial policy was focused on advancing domestic capabilities in the design and manufacturing of vehicles, initially through foreign partnerships, but later, independently. Its successes today also have to do with the fact that China has developed a niche competitive advantage over many others.

It knew that it would be very difficult to compete with other well-established international automakers, and therefore its industrial strategy was to develop technology leaderships in low-cost alternative energy vehicles.

Today, China is the largest manufacturer and consumer of electric vehicles. But more importantly, it is also starting to be a major player in the global automotive landscape especially for new energy vehicles.

It is important to remember that the automotive industry is not what it used to be any more. Major players in the traditional market space are currently being challenged by new and upcoming digital start-ups that seek to redefine mobility.

The fact is that the automobile is on the cusp of a major revolution. Almost on a daily basis, we hear about the disruption swiftly unfolding, from the prospect of an autonomous truck platooning to flying taxis. To a very large extent the future of mobility will be increasingly digitalised.

These are fundamental changes to the concept of mobility that we have grown accustomed to for more than 100 years. So, let’s not revive our national car agenda for the sake of sentimental values.

Instead, let’s have a more holistic, evidence-based industrial policy for the automotive sector, and not let our pride get in the way of rational decision-making.