AUSTRALIA’S CAR INDUSTRY

Today the Australia’s car industry is practically dead. The planned exit by Toyota from the country has hit the final nail in the coffin of Australia’s car industry. Prior to their demise, Ford and Holden (Australia’s car manufacturer) have also stopped from making cars. This is despite more than USD 1.2 billion financial aid from the Australia’s government.

For those who understands very well the impact of automotive industry towards country’s economy will surely know thousands of jobs would be affected. Beyond that,  USD21 billion will be wiped out from the economy and most likely the country will go into recession.

Well, what happened and what can we learn?

Due to the strong Australian dollar and high costs of manufacturing, the Australian products are not competitive even in Australia. Together with Free Trade Agreement (FTA), Australia is one of the most open  automotive markets in the world and this further aggravate the situation as  foreign goods (cars) flood the Australian market without Australian goods penetrating foreign markets. Ultimately, this leads to outflow of funds, contributing to deficits.

Malaysia is no less different than Australia. We too have our own national car in a highly competitive automotive industry. Attempts to denigrate Malaysia’s national car, Proton reflect how shallow some Malaysians are from what the Proton represented and what was its real objective.

Firstly, it must be pointed out that Proton is our launchpad in acquiring engineering knowhow and consequently propelling nation to a developed industrialised country.

However in the name of liberalisation and the obsession of making foreign cars cheaper, we need to ask ourselves whether do we want to preserve our automotive industry that employs more than 550,000 workers and contributing nearly RM30 Billion to country’s GDP or do we want to open up our tiny market to cheaper foreign cars so that our consumer could have more choice?

Some may argue we can close down Proton and do the Thailand and Indonesia’s way. Yes, we can. But being a mere a assembler won’t make us a developed country. Just look at these countries- were they developed?

In fact, we can’t compete with them simply because our cost of labour is higher. Or are we suggesting we pay our workers a pittance? Then, we can kiss goodbye to a high income economy.

What happened in Australia is an interesting case study. When we liberalise our market too much, the shrinking market for local cars may result in the cessation of production locally. Thousands of jobs generated by the national car industry will be lost. Not only we lose much of our engineering capability, we can’t create more high income jobs as engineering-based industries cannot fund skilled workers. Then, expect more serious brain-drain problem.

Buying cheaper foreign cars must result in outflow of funds. As a trading nation, we must balance our export and import sheet. Australia is lucky to have large reserve of  iron ore to export to China. But for how long Malaysia can rely on Petronas’ money to offset the deficit caused by our import? Already we have to rationalise subsidies in order to reduce our deficit.

Admittedly Malaysians pay more for their car. But the high car prices is not without justification. It may be old-fashioned to say this but that’s the price we have to pay for our country to be developed, to be well-equipped with technology, to be a trading powerhouse, to be industrialised, to produce highly skilled workers and to reduce country’s deficit.

United States of America knows this very well. That’s why they spent RM150 billion to bail out General Motors (GM). Not because they are anti free market but market is not ‘really free’ when you have your own product.

Korea and Japan take half of century or three generations to be at where they are today. Proton needs some protection but it will be removed gradually.

Hopefully we may not ended up like Australia, UK and Detroit.

MatRodi

Advertisements
Tagged , , , , ,

18 thoughts on “AUSTRALIA’S CAR INDUSTRY

  1. RMF Shahnan says:

    without proper controls in place, “free” market has ALWAYS proven to be most volatile and least sustainable.

  2. Wan says:

    That’s why we have hisbah in Islam. An arm’s lenght intervention by the government

  3. malaysian. says:

    I think we should let Proton die like what happen in Australia. Without the Proton, Malaysian can save their money with cheaper cars and divert their money to more productive means like education. Proton has been given 30 years but they end up best of rebadging other cars. Most money is in the drain due to cronyism. They should have their natural dead if they can’t compete.

    • MatRodi says:

      yes we should let the 150,000 direct and indirectly employed by Proton to naturally die.

      they can compete. they already are. but give them some protection and time. Have your seen their latest suprima s?

      • malaysian. says:

        How many suprima S sold? Real pathetic sale for a 200 million project. They can’t even compete with Perodua.

    • Kucing Kurap says:

      Well, would you say that to Ekran Berhad or Perwaja Steel or some other zombie-like companies? Hmmp? Tell me, which BIG companies in Malaysia which never enjoy some form of political patronage, connections etc.?

  4. Aziz says:

    Well written bro. Well research, well thought out. Unlike outsyed the box fellow, whose bloggs more often than not are just stupid comments …….very emotional and of low quality.
    Keep it coming bro…..maybe it can educate bloggers like outsyed fellow.

  5. Corbulo says:

    Funny, your logic.

    Singapore is a triple-A rated high-income economy, where cars are very expensive, yet it doesn’t have a domestic car industry. It sees better jobs and more value-added in sectors like biologics, pharmaceuticals, petrochemicals and water technology.

    Yet that hasn’t stopped several of the big car manufacturers setting up regional Hqs in Singapore. Like BMW, Daimler, GM, Porsche and Volkswagen.

    What type of value-add is Proton bringing to Malaysia? Has it pioneered any ground breaking and innovative technologies that have not already been brought to market by the likes of BMW, Mercedes-Benz or VW?

    And given a level playing field in Asean, do you expect Proton (and Perodua) to out-muscle and out-sell their competition?

    There’s only so much that protection and subsidies can give you.

    It’s sad that the apologists for Proton haven’t grasped this fundamental fact!

    • MatRodi says:

      Yes I am the Proton Apologist who tried to reasoning with free market preacher and Singapore lover like you 🙂

      well, lets get the facts right.

      1) It is Thailand and Indonesia that have become regional hub for car manufacturer.. Not Singapore. I don’t remember a car being assembled in that Island- maybe you can enlighten me.

      2) Or do you mean corporate HQ? Well, undeniably a lot of multinational companies like Mercedes has set up their hq in Singapore because their friendly policies. But that doesnt relate to this article because there a lot of differences between regional hub and regional hq.

      3) In terms of engineering knowhow and technology breakthrough, now we can develop a car from scratch, build our own engine, produce a fuel-efficient and highly safe car (proven and accredited by International independent body). You can compare cherry from china and tata from india to our proton. In fact the current preve and suprima s can compete with the likes of kia rio and pegeuot 470.

      4) As far as the current market landscape that has been liberalized due to FTA is concerned, Proton might find it very difficult to penetrate to ASEAN market. But the next best thing it can do is to reduce outflow of funds from the country. Well, if Malaysians are not supportive to its national car, how do you expect it can do better globally?

    • Hasnan says:

      All malaysian products without protection, subsidies or incentives will not make it…that like asking you to go out to the golf course and compete against Tiger Woods without any strokes

      • Kucing Kurap says:

        So, tell me, which American, British or products of other developed countries, which during their development stages did not enjoy some form of protection, subsidies etc.? Even to this day, do you expect Washington to keep quiet if they know Boeing’s interests are being unfairly undermined by the European’s Airbus? Do you think Beijing is going to sit idle if Huawei being victimised? Or you expect Paris to lead a crusade to end agricultural subsidies to be abolished across the EU and risk having potatoes being dumped by the truck-loads in front of the Elysees Palace?

        BODOH PUNYA KOMEN!!

      • asus says:

        kucing kurap,

        re: So, tell me, which American, British or products of other developed countries, which during their development stages did not enjoy some form of protection, subsidies etc.?

        30 years of protection for Proton still not long enough? Isn’t 30 years of ‘development stages’ are too long? Malaysians wouldn’t mind of perpetual protection for Proton if car prices are low and comparable to other countries. RM70-80k should be able to buy us a Camry, a D segment car. Not Suprima or Preve. But our Camry is selling at RM150k. RM70k goes to government in the form of various taxes. Even selling at RM70-80k, Malaysians still prefer Vios or City. The strategy of imposing high taxes on foreign brands is no longer that effective. Proton used to command a market share of 70% prior to year 2000 but it has dropped to 25% today even though the total industry volume has increased substantially over the same period.

        re: Proton=Mahathir=Melayu

        Proton sekarang bukan syarikat milik kerajaan lagi. Sudah dijual kepada DRB Hicom milik Syed Mokhtar. Mengapa kerajaan masih lagi mengekalkan dasar lama untuk melindungi sebuah syarikat yang kini dimiliki secara persendirian?

        re: Siapa import Cherry and Chana ke Malaysia?

        Siapa yang bagi AP?

        re: It’s ok, because Malaysia especially under Pak-Lah-Sleepyhead is stupid enough to let Singapore help design/plan for Iskandar, ……………………

        Recently, Sultan Johor sold few plots of land to a developer from China for RM4.5 bil. What would you say?

    • Kucing Kurap says:

      Singapore remains like that because Malaysian leaders are stupidly not as kiasu as Singaporean Lee-dynasty led city-state. If Malaysian leaders are as calculative and as busuk-hati as them, do you really think Singapore can actually survive? Hmm? It will implode inside out.

      What’s the point of having a triple-A rated high-income economy if a high-skilled migrant worker which help propped the city’s economy, can get a decent flat at an affordable price? It’s ok, because Malaysia especially under Pak-Lah-Sleepyhead is stupid enough to let Singapore help design/plan for Iskandar, and despite all the bad-mouthing of Johor by Lim Guan Eng and his ilks (which Singaporeans are more than happy to help disseminate), in public or private, Singaporeans still shop and buy properties in Johor. And Iskandar will also help provide housing needs for Singaporeans and expats who are working in Singapore at the expense of Johoreans/Malaysians.

      Please la, level playing field my arse! Proton and Perodua are both working hard to improve themselves and yet Malaysians are always critical of these entities, especially Proton since the 80s. Yet today, those who had scorned on Proton in the past including opposition supporters are driving these Malaysian-made cars. Kalau tak suka sangat, beli sajala Cherry or Channa, lagi murah dan lagi tiada kualiti. Plus, apa disruptive technologies yang Chana or Cherry boleh buat yang BMW tak boleh buat? Eh halo, if the likes of Saab, Ford and other motoring giants pun ada masalah, you expect Proton to be super-perfect?

      Pokoknya, bila sebut Proton, ada orang di Malaysia nampak Proton=Mahathir=Melayu. Itu yang sebenarnya. Siapa import Cherry and Chana ke Malaysia? Added-values la sangat!!

  6. asus says:

    I am not an expert in the automotive industry. Any mistake, please correct me.

    re: Firstly, it must be pointed out that Proton is our launchpad in acquiring engineering knowhow and consequently propelling nation to a developed industrialised country.

    In order to be a developed nation, there are lots of criteria. As far as acquiring engineering know how, the expertise in car manufacturing per se is not sufficient. What about other industries such as electronics and manufacturing. Majority of local companies in Malaysia that are OEM manufacturers. They didn’t create and manufacture their self-developed brand. L

    re: But being a mere a assembler won’t make us a developed country. Just look at these countries- were they developed?

    Neither is Malaysia a developed nation as of now. What value-adding engineering know-how that Proton has developed or contributed to Malaysia? Lots of people give the example of Preve or Suprima S. No doubt these 2 models are better in terms of specification if compare with foreign brands of similar price range. Why people still continue buying Vios and City that have lower spec? Simply because people need a reliable and good quality car for long term use. Not the fancy spec. What is the point of having high end spec but cannot sell? Proton may have a high spec model with key less engine start. Question is how long the key less function can last?

    re: Some may argue we can close down Proton……………..

    Proton is no longer a GLC. It is now a private company owned by Syed Mokhtar. Why the rakyat have to continue paying high prices so that Proton can be protected?

    re: Not only we lose much of our engineering capability, ……………

    Proton may have developed its own engine or certain models. But their industry volume is low compare with other companies like Perodua, Naza etc etc that merely assemble foreign brands.

    re: Proton needs some protection but it will be removed gradually.

    Even with the continuation of protectionism policies today, Proton market share continues to decline and lose to other car assemblers. Can’t imagine what will happen when protection is removed.

  7. IT.Scheiss says:

    Mat Rodi,

    I’m all in favour of Malaysia designing and making our own products but after 30 years of high car prices being a burden on the rakyat, it’s time for a rethink of our automotive industry strategy.

    Firstly, Holden, Ford and Toyota are not exactky “Australian” cars. Holden is a General Motors company except that the Holden car was designed and built in Australia to suit the Australian market. Likewise for Ford which designed and built models such as the Ford Falcon for the Australian market. Ford also designed and built car models in Britain for the British market.

    British Fords, such as the once popular Ford Escort were inthe 1.3 and 1.6 litre range and small compared tothe big Ford models built in the U.S. for Americans.

    Instead of trying to do it ourselves, Malaysia should try and encourage multinational car makers to design and build models in Malaysia, using Malaysian talent, materials, etc. for the Malaysian and South-East Asian market.

    The problem facing countries like Malaysia is that developing and acquiring technologies to differentiate our products or manufacturers from the competition is very very expensive, especially for newcomers in an already well-established industry sectors.

    Mercedes’ legacy traces its roots to the Benz Patent-Motorwagen, widely regarded as the world’s first car when it was launched in 1886.

    The Toyota Motor Corporation traces its roots to its founding in 1937 by Kiichiro Toyoda, as a automotive spin-off of Toyota Industries Corporation,founded in 1926 by Kiichiro’s father Sakichi Toyoda. Today, Toyota Industries produces equipment and parts for the textile machinery, automobiles, materials handling equipment, electronics devices and other products and industry sectors.

    Today, Toyota Industries is wrth 12.35 billion euros,

    Merredes-Benz’s parent,Daimler AG earned 112.2 billion euros in 2012 and its total equity was worth 45.51 billion euros that year.

    So it’s not easy for a relative newcomer to break into such an established market against such established technological know-how and the sales and service ecosystem which the incumbents have already established over many decades and even over a century.

    An extensive sales and service ecosystem is crucial to the success of a car in any market, including Malaysia, and ready availability of affordable spare parts and mechanics to service and repair the car determine its resale value.

    For example, one of my friends who is an off-the-road ethusiast once bought a Russian Lada Niva, then found to his horror that repair and service facilities and expertise was only available in the Klang Valley but not out where he goes off-roading. He promptly sold the Lada and bought a used Daihatsu 4 x 4 instead.

    Whilst Proton has an extensive sales, service and support ecosystem in Malaysia, I understand that it faces big challenges to develop such an extensive ecosystem in some export markets, which in turn impacts its chances of success in export markets. Building up such an extensive ecosystem in export markets needs a lot of money but can Proton or its overseas distributors afford it.

    Also, some would cite the examples of Korean brands such as Hyundai, Kia, Daewoo, etc. but bear in mind that these products are produced by diversified conglomerates, with sources of income from multiple industry sectors to be able to sustain card devlopment and production until it’s profitable.

    Moreover, many Japanese listed companies have mostly institutional investors as shareholders, who have the means to allow the company a long run of loses until profitability, unlike the quarterly review system of U.S. listed companies.

    The challenge facing countries like Malaysia in competing in technology in established industries such as automotive is whether we can afford the funds to pay for such technology development and acquisition, and to develop and retain the skilled human resources required for such technology development and production.

    Now how do we get around that?

    Thus we have to think more practically, given real-world material conditions.

    By getting automotive multinationals to design and build car models in Malaysia with Malaysian expertise will develop the technological skills base and provide opportunities for Malaysian parts suppliers without burdening the rakyat.

    After 30 years of trying to go it ourselves, it’s tume for Malaysia to rethink its automotive industry strategy whilst sustaining and even expanding the employment opportunities in the industry.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: