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Objectives of the National Automotive Policy
In Frost & Sullivan's opinion, NAP 2014 has been developed with various stakeholders goals:
- National automakers - to make them more competitive and sustainable
- Foreign automakers – to attract them to increase investments, promote greater local value add and use Malaysia as a regional hub for production
- Local auto part vendors – to develop their capabilities to achieve sustainable growth and exports
- Bumiputera – to grow the participation of Bumiputeras in the automotive value chain
- Consumers – progressively reduce prices and increase safety and quality
- Government - needs to ensure sustained growth in employment in the automotive industry and prudent fiscal management (maintain excise duties and reduction in trade deficit)
The NAP 2014 seems to try and balance the above strategic priorities. The short term interests of these various stakeholders do not converge. As such, it can be seen as a long term policy framework that gives direction to the various stakeholders rather than make a disruptive change in the industry.
Energy Efficient Vehicles (EEV) program is targeting fresh automotive investments
Malaysia's EEV policy covers a wide range of vehicle segments and powertrain technologies. Vehicle segments covered includes A to J segment of passenger vehicles as well as two wheelers. Powertrain technologies include internal combustion (IC) engines, hybrids, electric vehicles, LNG, CNG, LPG, biodiesel as well as fuel cells. Indonesia and Thailand's green vehicle policy focusses only on internal combustion (IC) engines of smaller cc with stringent price, production, investment and export conditions. The incentives, available in both Thailand and Indonesia, are clear and transparent.
On the other hand, the EEV policy puts no investment conditions. As such, it offers a great degree of flexibility for a potential automaker interested in investing in Malaysia. It is likely that the extent of incentives will depend on the automakers level of investment and localization commitment. However, from an automaker's standpoint, their commitments will depend on the extent of incentives available. So, there could be a high degree of interdependency. The customized incentive approach could work if a clear methodology is in place on the factors determining the extent of incentives. However, if the incentives are purely on a case by case iterative process, then it could lead to prolonged negotiations and some degree of policy uncertainty for the automakers.
Apart from incentives, automakers interested in the EEV program will also consider other market demand and supply chain strength factors. The potential EEV market needs to be large enough for the investments to be economically viable. At the same time, Malaysia needs to develop a strong ecosystem of suppliers that feeds into the EEV supply chain. Automakers that are yet to commit substantial investments in the region or would like to diversify geographic risk will be the high potential prospects for investments. Obviously, global automotive investors do have several options. If Malaysia offers a clear and attractive package, then there is a possibility of attracting some part of the next wave of investments. Frost & Sullivan believes the success or failure of this program will depend on the speed and clarity with which it is implemented.
Development of Globally Competitive Automotive vendors
The Malaysian automotive parts industry fAir Jordan XIII Low