I have received an email two weeks ago from one of my reader. Excerpt as follow:
From: Fong Pan <fongkai1980@yahoo.com>> >
Date: Jun 21, 2006 3:20 PM> >
Subject: questions abt car industry> >
To: CompetitiveMalaysia@gmail.com> >> >
Hello Peter,
I have been your blog reader and recently I have to do some writing on car industry in Malaysia. Can you please offer me some knowledge abt the car industry. And it seems like auto parts vendors and manufacturers have also absorbed huge chunk of profit.
Thank you,
Colin.
I have been busy for the past two week and I only able to reply now. Sorry for late reply. Current issue of The Edge has make an analysis on local automobile industry. Get a copy for update.
Meanwhile, my next few post on this blog will comprises reply to Colin (Fong Pan) beginning with the issue I most familiar with.
Auto parts vendors consider low margin business in Malaysia. Despite Proton continue to claim it substantial cost are cause by it social obligation to give contract to Malaysia auto parts manufacturer.
At one point of time. Proton ex-CEO Tengku Mahalee said Malaysian chinese should support Proton and high import tax impose on imported cars to protect Proton market shares in Malaysia, if not, a lot of proton auto parts supplier would have to close down and a lot of it own by Malaysian chinese.
The statement by a CEO of a Government Link Company(GLC) indicate that most GLC's CEO view that Malaysian chinese are racist. They would support protectionist import tax if he mentioned that a lot of Proton supplier comprises chinese.
In actual fact. Chinese is not racist. While chinese will protest if Proton required all auto parts vendors must be 100% own by bumiputra as this is unfair and racist policy. Malaysian chinese would not care if they given a fair opportunity to supply to Proton but the vendor forces to close down due to it own uncompetitiveness. Malaysia chinese would not seek government protection base on the reason that some auto manufacturer comprises Malaysian chinese. It is the job of trade organisation like Auto Parts Manufacturer Association of Malaysia, if any but not the whole chinese community. CEO of GLC should spend time to increase their respective competitiveness of the company rather than play up racist issue like politician.
AIC diversification
veteran bumiputra auto parts vendors to Proton, Datuk Haji Sarip bin Hamid who own a few public listed company including AIC Corporation Bhd, Jotech Holdings Bhd. Started as auto parts vendor to Proton, AIC Corporation Bhd' s AIC stand for Autoindustries Corporation. However, Datuk Haji Sarip realize that margin become lower and lower when Proton demand it supplier to lower their cost. Thus, he diversified to more lucrative semiconductor manufacturing. Now, other than non-bumiputra control MPI, Unisem, Globetronics etc. Datuk Haji Sarip's AIC Corporation is the only bumiputra semiconductor manufacturer in Malaysia. Its later diversification to TFT-LCD manufacturing make him now the only TFT-LCD public listed manufacturer in Malaysia.
Datuk Haji Sarip is one of the bumiputra entrepreneur that I respect. He does not relied on contract from GLC like Proton, but he get contract from Multinational Corporation (MNC) base on his own competitiveness. However, I feel government never give him much help like other crony. He prefer to make donation to the poor rather than make political donation. Maybe this is the reason he never get help from the government.
Ingress invest in Thailand
Another bumiputra manufacturer Ingress Corporation Berhad set up factory in Thailand, Detroit of Asean, and Indonesia. The venture, however, yet to reflected on profit in financial statement.
Delloyd diversified into plantation
Another auto parts manufacturer Delloyd Venture Berhad, which control by non-bumiputra, has venture into oil palm plantation. Delloyd Venture also announced that it explore the opportunity to become an OEM handphone manufacturer.
All the above bumiputra and non-bumiputra companies prove that auto parts business is low margin business where it player try to diversified into other industries.
The most competitive auto parts manufacuturer in Malaysia
In my opinion, I feel the most competitive auto parts manufacturer in Malaysia is New Hoong Fatt Holdings Berhad. New Hoong Fatt's cash flow, grow are impressive compare to other parts manufacturer.
Link:The Edge: Slowing to a standstill
Shakeout among used car dealers
How the main auto players measure up
Update: Components factory lays off 270 staff
Two-hour notice company rapped
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