KUALA LUMPUR, March 1 — The recent pact between France’s Groupe PSA and Naza Corp Holdings to produce PSA-branded cars in Malaysia is expected to face stiff competition from local and Japanese automakers, said BMI Research today.
Despite that, the Fitch Group research firm said the deal will give the French automaker access to an under-utilised and ready-made manufacturing facility which it can use to leverage sales opportunities in the domestic market and Asean region.
“At present, Naza's plant is producing about 15,000 vehicles per year. Adding to this, PSA will also be able to leverage off Naza's supplier network as well as gaining access to testing facilities for cars produced at the facility,” the report said.
BMI said the recovery in domestic car sales will present opportunities for PSA.
“After flat growth of just 0.02 per cent in 2017, we expect passenger car demand in Malaysia to trend higher in 2018 and 2019, rising 2.2 per cent and 3.1 per cent respectively off the back of a positive growth outlook for the Malaysian economy as well as a strengthening local currency,” it said.
Added domestic production will allow PSA to price its vehicles more competitively in the local market, which will help support growth in its sales volumes, which were up 12.5 per cent in 2017.
That said, the dominance of Malaysian and Japanese brands, including Perodua, Proton, Honda and Toyota, in the local market will present a challenge for PSA to achieve a significant rise in sales volumes and market share in the country.
In 2017, sales of PSA’s cars constituted just 0.7 per cent of total sales.
In comparison, Perodua cars had a market share of 39.8 per cent, Honda at 21.3 per cent, Proton (13.8 per cent), and Toyota (9.3 per cent).
“We believe that by establishing a manufacturing facility in Malaysia, PSA will also be able to take advantage of low tariff barriers under the Asean Free Trade Area Agreement to export throughout the Asean region and enter high growth markets such as the Philippines, Vietnam and Thailand.
“We forecast new car sales in the Asean region to grow at an average rate of 7.6 per cent in 2018 and average annual growth of 6.0 per cent over 2018-2022,” said the report.
While this robust growth will be a positive, PSA however will have to face stiff competition in the wider Asean region from the previously mentioned Japanese automakers in its efforts to grow its sales and profitability in the region.
In February 2018, PSA and Naza Corp announced that they had signed a deal to jointly produce PSA-branded cars for Malaysia and other Association of Southeast Asian Nations (Asean) markets.
As part of the deal, PSA will own a 56 per cent stake in Naza's manufacturing plant in Gurun, Kedah, in Malaysia, which currently assembles Peugeot and Kia cars and has an annual production capacity of 50,000 vehicles.
The first vehicles, which are set to be produced in 2018 are for the Peugeot brand, while manufacturing of Citroën branded cars will begin in 2019.
