Whither Third National Car — Rais Hussin

JUNE 1 — There are 4500 parts that go into the making of a conventional vehicle. Whether the parts are more or less, there is a benchmark on how cars are made. This is where simplicity and clarity are needed in any discourse on the third national car industry.

First and foremost, when something is the third, it means the previous two has either been achieved —- beyond measure —-thus demanding the need for a third, or alternatively, the first and second national vehicle project has had a mixed results, therefore, demanding a third.

Be it Proton or Perodua, the measure of any success of a “national” automobile is the degree to which a manufacturer can globalize it’s product. 

No car can survive on sheer domestic market alone. There was a time when Indonesia worked with Kia of South Korea to build it’s own car. The project, started by Tommy Suharto, floundered, and the whole project failed in it’s lift off; this despite having more than 269 million people as it’s potential consumers. 

Malaysia has about 11.8 per cent of the population of Indonesia. The power of any national car rests on exporting them abroad. As things are, Geely has had a partnership with Proton in Malaysia. Geely is the largest producer of private cars in China. 

Even if Geely is doing well, such as by acquiring Volvo and a strategic stake in Daimler Benz, it is number six in the ranking of all the car manufacturers in China. The first five are backed by the Chinese government or state owned companies.

Malaysia, with a third or fourth national car, will always enter such a complex market. One, it has to know where and who can buy the Malaysian made car across the world. The consumer research that goes into it, not to mention the need for perpetual promotion (of the national car) will sink into the cost 

This compels the Malaysian government to step in, if the projects begins to diminish in value. In fact, even before one can see any growth in the bottom line of the national car, good money would have to be put in, non-stop, to deliver the yield.

Of course the skill sets gained from the supply chain would be massive. But the same skill sets can be acquired by sending 50,000 or 100,000 car engineers to Japan too, now that Japanese manufacturing and car industry are facing a severe shortage of workers. This is the same phenomenon in South Korea as it is in China.

To cut to the chase, the strength of Pakatan Harapan may well lies in eliminating the redundancy of the previous government. The administration of Najib, for example, paid millions of ringgit to feed the social media machine, even though the latter can be had for free in most cases.

The administration of Tun Dr .Mahathir Mohamed needs to know that there is literally no value in reinventing the wheel. Those who attempt to try again and again are not bound to succeed.

There is no denying that the auto industry is big for jobs, and the supply chain provides economic value down the line. However, the conventional auto industry is a sunset play, in the face of the rise of electric vehicles (EV’s). 

As for EVs the Chinese have more than 400 companies trying to make them. If we take the solar industry experience as a guide, this will end in total financial loss for most of them and the chances are bleak that Malaysia could survive the crossfire of competition between China, Germany, Japan and the US.

Instead, Malaysia would be better off positioning itself as the destination for global EV giants looking to cater to Asean market demand. There we will find competition from Vietnam and Thailand, the former having abundant labor at low cost, and the latter with decades of experience in CKD (Completely Knocked Down) assembly.

Even this model must overcome a high bar. In five months the Chinese transformed a muddy field Into the new Tesla Gigafactory in Shanghai. Thousands of highly qualified Chinese are queuing to apply for jobs and they are on schedule to start producing cars in a few more months.

 In the meantime we are facing a severe factory labour shortage in Malaysia, which will become a bottleneck for the large scale manufacturing necessary in the auto industry. 

So what does this mean for Malaysia? Should we abandon the playing field altogether? No, of course not. But we absolutely must design an EV master plan and identify which verticals we want to compete in. We are likely to find niches In fast-growth segments such as assembly of battery modules. The innovations in storage tech will ensure that IP-intensive initiatives from Silicon Valley and Germany pick Malaysia - with its English-language and Common-law ecosystem — over China or Thailand or Vietnam.

*  Rais Hussin is Parti Pribumi Bersatu Malaysia’s supreme council member and strategist.

** This is the personal opinion of the writer and does not necessarily represent the views of Malay Mail.

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