Did you watch the live telecast of Proton’s 25th Anniversary gala dinner which our Prime Minister Datuk Seri Najib Tun Razak called on local automotive companies to consider merging if there was overcapacity in the industry? Well it looks like the talks it already on the way for both local automotive players that have been revealed by the Minister of International Trade and Industry (MITI) Datuk Seri Mustapha Mohamed during the launching of Industry Led Automotive Graduate Apprenticeship Programme on Monday.
According to the minister, this is a timely suggestion and the consolidation was urgent as there was excess capacity, keen competition and also a need to increase export earnings as the local automotive industry cannot depend on the small domestic market.
On what models to be produce, the minister has hinted that the model will be up to the local automotive players which is still not been revealed yet. What is most important to him is that, the local automotive players must ensure that steps are taken to increase productivity and efficiency as well as reduce production cost and increase competitiveness of the local automotive industry.
As to whom the local automotive player is yet another mystery puzzle in the Malaysia automotive industry. If you do remember, way back late last year and early this year, there are rumours that Proton and Perodua are considering a merger to form a new larger auto alliance in Malaysia. We have seen a real spike in Proton share prices during that time as the local investor is keen with this news. Suddenly the rumours when dead when another rumours emerge as Proton was in talked with the automotive giant Volkswagen.
We already know the outcome of the talks and looks like this hint by the minister has sparked yet another strong rumour of Proton to merge with Perodua. I think it is a very good move, as what is happening right now is not what has been planned during the establishment of Perodua. During the initial idea of having two local automotive car industries, both automotive players are design to complement each other in the automotive industry, to spur technical knowhow and create job but what is happening right now, it has been a tussle of big brothers and younger brothers to capture the market share and this has make the industry as “over capacity” as what has been mention by the minister. Just imagine, how much money has been spend to create a new car from scratch and yet the volume is so small to recoup back the money during its product life cycle.
With the merger of this two automotive player, the money spend to produce a car based on ones strength is a much better preposition and more focus can be made to produce a much higher quality car, with a better economic of scale thus increase the profit margin which is required to stay relevant in this ultra competitive world auto industry.
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