Which cars are better Proton or Perodua

Industry compact: After a successful year, the signs for Malaysia's automotive sector are pointing to consolidation

General market developments and trends

New shine for Proton

Malaysia wants to further expand its automotive sector. The Chinese automobile manufacturer Geely has plans for the ailing Malaysian car brand Proton: The costs are to be reduced by up to 30 percent and the output is to be increased from currently less than 100,000 vehicles annually to around 400,000 in 2027. A production facility in China is also planned to supply the Chinese market. Geely bought a total of 49.9 percent of Proton Holdings in 2017. The multinational automotive company Geely sells motor vehicles under the brand names Geely Auto, Lotus, Proton and Volvo. The group also owns a 9.7 percent stake in Daimler Benz.

The Proton X70 model, the Sports Utility Vehicle (SUV) announced last year and built in Malaysia, is already exceeding expectations. This model is based on the Boyue from Geely, which is already very successful in China. With sales of 15,175 units in the first half of 2019, the model leads the SUV division. Overall, Proton increased its sales in the first half of the year by 61.7 percent compared to the same period of the previous year and thus achieved a market share of 14.7 percent. In 2018 as a whole, the market share was still 10.8 percent. All markets with left-hand traffic are to be supplied from Malaysia.

Considerations for a third Malaysian car brand are not yet off the table

The idea of ‚Äč‚Äčanother car brand in the country is also still under discussion. Prime Minister Mahathir Mohamad repeated his ideas in a speech at the Malaysia Auto Show in April 2019 that Malaysia should establish a third Malaysian car brand alongside Proton and Perodua. However, there is still fierce resistance to this and to the associated considerations of tightening non-tariff trade barriers. Potential investors, especially from China, are still there.

Market opportunities for the automotive sales market

Some German automobile manufacturers achieved record sales in 2018

2018 was a very good year for the Malaysian automotive sector. New vehicle registrations went up by 3.8 percent, while production rose by as much as 13.1 percent. Foreign trade also showed very good figures. Car imports rose by 37.2 percent, imports of buses by 10.6 percent and trucks by 24.4 percent. This more than made up for the poor results from the previous year. Car exports rose by an excellent 51.2 percent.

New vehicle registrations in Malaysia (number; changes in percent)

category 2017 2018 Change 2018/17
Overall, including 576.625 598.714 3,8
Passenger cars, including SUVs 514.675 533.202 3,6
Pick-ups, Panel Vans and Prime Movers 47.516 49.562 4,3
truck 13.847 15.324 10,7
buses 587 626 6,6

Source: MAA industry association

The year 2019 is all about consolidation. In the first five months, 253,808 vehicles were sold. This means an increase of 12.7 percent compared to the same period of the previous year. If you look only at cars, the plus of 14.3 percent (232,362 vehicles sold) is even more positive. A similar picture emerges for the production figures: here the increase is 2.6 percent overall and 3.4 percent for cars alone. In both statistics, the slightly declining numbers for buses and trucks cloud the picture somewhat.

Sales of cars in Malaysia by manufacturer (number of units; market share and change in percent)

Manufacturer 2018 change Market share 2018
Perodua 227.243 10,9 38,0
Honda 102.282 -6,6 17,1
Toyota 65.551 -5,7 10,9
proton 64.744 -8,8 10,8
Nissan 28.610 5,4 4,8
Mazda 16.038 64,8 2,7
Mercedes 13.463 9,1 2,2
BMW 12.008 13,1 2,0
Volkswagen 7.001 7,1 1.2 (Rank 11)

Source: MAA

Despite these currently very good results, experts expect only a very small increase in the results of 2018 for the full year 2019. They assume that the results will deteriorate in the second half of the year. This is justified by the general uncertainty, by global events, but also by the current product range changes at many automobile manufacturers. According to market observers, this leads to a short-term reluctance to consume on the part of customers, as they first have to get an overview of all the new models. It also takes a while until all models are available in sufficient numbers.

Car imports in Malaysia (number of units, change in percent)

category 2017 2018 Change 2018/17
Car 141.361 193.965 37,2
truck 60.658 67.119 10,6
buses 6.434 8.005 24,4

Source: Comtrade

Market opportunities for automotive and automotive parts production

German car manufacturers dominate the premium segment

The premium segment continues to be dominated by Mercedes and BMW. Both had a very good year 2018. Mercedes increased its sales by 9.1 percent and thus almost reached the mark of 13,500 units. The market shares improved from 2.1 percent in 2017 to 2.2 percent. The majority of automobiles sold are assembled locally in Pekan, Pahang Province.

Motor vehicle production in Malaysia (number of units, change in percent)

category 2017 2018 Change 2018/17
Overall, including 499.639 564.971 13,1
Passenger cars, including SUVs 459.558 522.392 13,7
Pick-ups, Panel Vans and Prime Movers 25.835 28.108 8,8
truck 13.697 13.900 1,5
buses 549 571 4,0

Source: MAA

BMW was able to increase its sales last year by an excellent 13.1 percent to over 12,000 cars. Only Mazda among the top ten had a higher growth rate of 64.8 percent. Thanks to this strong increase, the car manufacturer BMW also expanded its market share from 1.8 percent to 2.0 percent. BMW is currently assembling eight models locally at its facility in Kulim in the province of Kedah. The new X3 has also been assembled there since April 2018. At the same time, BMW has started to export the 3, 5 and 7 series BMWs from Malaysia to Vietnam and the Philippines, thus expanding Malaysia as a Southeast Asian hub. Mercedes now also exports vehicles from Malaysia.

In addition to the two premium suppliers, Volkswagen also had a very good year. The group was able to increase its sales by 7.1 percent and is now in 11th place with a market share of 1.2 percent.

The automotive industry is of enormous importance to Malaysia. The sector consists of 27 manufacturers, over 53,000 distributors, sellers and service providers and employs more than 700,000 people.

Motor vehicle export from Malaysia (number of units, change in percent)

category 2017 2018 Change 2018/17
Car 13.123 19.838 51,2
truck n / a 548 -
buses 1.170 1.150 -1,7

Source: Comtrade

Almost two thirds (63.9 percent) of the imported reciprocating piston engines come from Indonesia. German products are in third place, behind Japan and ahead of Vietnam. When it comes to lighting and signaling devices, Thai products are clearly ahead with an import market share of 27.0 percent. This is followed by China and in third place Japan. German products are in sixth place.

Imports of selected automotive parts to Malaysia (in million US dollars, change in percent)

SITC Description of goods 2018 Change 2018/17 from Germany
713.21 to .22 Reciprocating piston engines with spark ignition 183 7,6 12
713.23 Diesel or semi-diesel engines 132 3,1 2
742.2 Fuel, oil and coolant pumps for internal combustion piston engines 55 3,8 3
773.13 Cable sets 68 44,7 12
778.31, .33 Ignition systems, starters, alternators, etc. 169 7,6 3
778.34 to .35 Lighting and signaling devices (without 778.2), windshield wipers, etc. 230 10,0 25
784.2 Bodies (including cabs) 51 18,6 13

Source: UN Comtrade

Business practice

Since the beginning of 2014, companies that are wholly foreign-owned have been able to manufacture cars with a displacement of less than 1,800 cc in Malaysia as part of the automotive policy. However, these must comply with the state requirements for energy-efficient vehicles, which are relatively broad. Foreign manufacturers can also obtain production licenses for pick-up trucks, hybrid and electric vehicles and motorcycles with a displacement of more than 200 cc.

The import of new and used vehicles requires individual permits from the Ministry of International Trade and Industry (MITI). Only certain companies selected by the ministry with a "Bumiputra status" (preference for ethnic Malay in the course of the Bumiputra policy) have received transferable, non-branded import licenses for individual automobiles (Open APs).

For a long time, the state shielded the domestic automotive industry from foreign competition with high tariffs. The measures are now somewhat more moderate. The import duty (MFN) for completely assembled vehicles (cbu) is basically 30 percent, for vehicles originating in the ASEAN countries and in Japan, duty-free applies within the framework of free trade agreements. The import duty rate (MFN) for completely dismantled vehicles (ckd kits) from third countries is 10 percent.

In addition to customs duties, when importing passenger cars, the displacement-dependent excise duty (Excise Duty) of up to 105 percent and the 10 percent sales tax (Sales and Services Tax - SST) are levied as border adjustment.

The import duty and excise tax exemption for the import of new hybrid cars under 2,000 ccm and new electric cars with less than 100 kW expired at the end of 2013. Only if these vehicles are assembled locally and if the respective assembly investment is of strategic importance will they benefit from tariff and excise duty reductions.

Further information on customs and import procedures can be obtained from MITI and Malaysian Customs. The Department of Standards Malaysia (http://www.jsm.gov.my) answers questions about standards.

Detailed information on business and tax law is available at http://www.gtai.de/recht as well as on import regulations, customs duties and non-tariff trade barriers at http://www.gtai.de/zoll.

Contact addresses

The "Industry Compact" series provides analyzes of important key sectors in the German export economy. Further country reports on the automotive sector and other industries can be found at http://www.gtai.de/branche-kompakt.

Contact person for the automotive industry: Eva-Maria Korfanty-Schiller; Email: [email protected]