IT has been described as a “regressive” move by some industry players. With all the talk about a third national car project, and possible conditions on the entry of foreign cars, we take a look at the top 10 reasons why we should not return to the days before the liberalisation of the Malaysian automotive industry.
1. Discriminating non-national auto makers turns them away from investing in Malaysia.
Thailand made a career out of automobile assembly and automotive parts manufacturing, making the two part of a vibrant export industry which contributes to 10 per cent of its gross domestic product (GDP). Despite the hype and hullabaloo about our national car projects, the Malaysian car industry contributed only four per cent to the nation’s GDP. The Malaysia Automotive Institute (MAI) has announced that it will generate 10 per cent of GDP by 2020. It is not clear how the motor industry will grow by double in the span of 2 years, but one thing for sure, is that to achieve this, something major needs to happen.
An academic study conducted a few years ago stated: “The stimulus packages by the government and introduction of new models have, to some extent, cushioned the progress of the industry in a positive way, but the stimulus package targets only the national automotive sector, and this discrimination of non-national auto makers is turning them away from investing in Malaysia. Creating a more dynamic automotive cluster through productivity enhancement and strengthening of innovation processes is still an option for Malaysia, but not in the disguise of ‘industrial nationalism’.”
2. Malaysian car manufacturers are not the most efficient.
And they won’t likely ever be, unless they manage to export in huge numbers. Export is the cornerstone of almost every successful car manufacturer. The car manufacturers of today dabble in immense volumes to achieve economies of scale. In such an environment, unless you have a captive market as big as China, export is key to staying cost effective. Germany and Japan are automotive powerhouses because they export much of their production. Recently, South Korea became a shining example of another country that puts itself on that list. But without exports, car manufacturing in Malaysia may be relegated to reliance on protectionism, which creates economic inefficiencies that the public may have to shoulder.
3. The car industry is taking away money from other industries that really need your ringgit.
Say a household makes RM4,000 a month. Let’s say hypothetically, they are paying RM1,000 for their home, the major big ticket item. The second big ticket item, the car, may end up subtracting close to the same amount from monthly disposable income. A protected, inefficient car company will cause a rise in car prices. Instead of paying RM600 for your car per month on a seven-year lease, you may be end up paying RM900 per month. That RM300 is wasted on inefficiencies, with marginal benefit to the economy as a whole.
Pumping it into other industries may help make the economy more vibrant and robust.
Last year, the GDP contribution by small- and medium scale enterprises (SMEs) increased to 37.1 per cent compared with 36.6 per cent in 2016. More disposable income for the public to spend will help this sector grow, and benefit more people, which leads us to the next argument.
4. Protectionism will concentrate wealth to a select few.
We all remember the stories of rich automotive vendors. Talk at the warung kopi has it that many of them struck it rich, while producing mediocre work. Are the tales true? Cold hard data would be hard to come by, but what is obvious is that these elites are a select few when compared with the diversity of those participating in manufacturing in Malaysia.
Going back to point one, the local motor industry contributed just four per cent to the nation’s GDP while SMEs contributed 37.1 per cent. They are fed from the same primary source — Malaysian household income. SMEs don’t earn much money from exports, but then again, neither do the car companies. Distribute the money fairly, instead of channelling it to just a few companies.
5. Protecting the car industry may actually be detrimental to its success.
It might seem counterintuitive, but remember that basic premise that we discussed earlier on. Success hinges on exports. The last batch of national automobiles that made it into Western markets performed abysmally in terms of sales. Why is that so? Maybe they are not up to par in terms of technology, value for money and refinement. Protectionism won’t help them become better. There are extreme examples of this in history. The Lada for example, was the choice transport of communist Russia, but was the butt of jokes for its poor performance, unreliability and plain ugliness in the Western world.
6. The global car industry is dying.
In 2018, would you invest in a newspaper printing plant? The auto industry may be headed the same way, with the rise of autonomous driving and ride sharing.
Former General Motors vice-chairman Bob Lutz had this to say about the car industry’s future, “it has no future”.
“It saddens me to say it, but we are approaching the end of the automotive era,” he wrote in Automotive News.
In the future, he said, people would use standardised passenger modules as the traditional auto industry dissipates. Within five years, he added, people would start selling their cars for scrap or trade them in as self-driving cars take over transportation.
In two decades, human driven vehicles will be disallowed on highways. Giants like Lyft, Uber, Google, and others will work from centres in Detroit, Germany, and Japan.
7. Even if the car industry does not die, it will evolve into something that our local companies are currently not prepared for.
So we have established that the car industry may be on the decline. Well, it is not just that. Besides autonomous technology, the car of the future may be powered by a completely different drivetrain. Basically, the industry is at a threshold where even the traditional manufacturers are not sure where to head to.
Our major car companies have relatively low technology compared with the wizardry available at giants like the Volkswagen Group and Toyota Motor Corporation. To date, neither the first and second national car have hybrid cars on the market. Electrification is an even more daunting prospect. These are new technologies that require huge amounts of investments before they will be ready for the market. Tesla is a case in point.
8. Malaysia has a serious congestion problem.
I don’t think I need to develop this point. If you are reading this while stuck in a traffic jam, please remember that in the past, Malaysia’s car ambitions made us neglect our public transportation. It is like going to the gym and just working on your chest and arms. In the end, you end up with really small feet. And Malaysia has “really small feet” now.
9. We need to really think about saving the environment.
Everyone in the developed world is starting to. Are we going to start cracking and do it?
10. Cars are one of the reasons Malaysians are fat.
Well, trying to pin Malaysia’s obesity problem on car protectionism may sound a bit sketchy, but it is a valid reason, and I need 10 reasons as 10 listicles fly on the Internet so bear with me. There’s a scientific study to back this claim. About a decade ago, a study, Walking, Cycling, and Obesity Rates in Europe, North America, and Australia, examined health and travel data from 17 countries, and discovered that a country’s obesity rate generally had an inverse relationship with the percentage of people that used active transportation. This brings up the question of whether we should subsidise more cars at the expense of healthier modes of transportation.