Thursday, 26 February 2015

Automotive sector development to benefit community

Small and medium enterprises (SMEs) are important entities in an industrialized economy contributing to the growth process of a nation.
Effective industrial production depends on the efficiency and creativity of the SMEs.
The success of some advanced economies is largely attributed to its SMEs.
In some of these countries SMEs made up 98 per cent of their industrial establishments contributing to over 65 per cent of the nations’ employments opportunities and generating more than 50 per cent of their gross domestic product.
The introduction of National Automotive Policy-NAP 2014-is expected to create more investments opportunities as the nation's automotive industrial direction is geared towards the manufacture of energy efficient vehicles (EEV).
Business opportunities in the automotive upstream and downstream supply chain are also expected to increase as the vehicle total industry volume increases in the coming years with the government's exports promotion and incentives for manufacturing vehicles.
Business opportunities in the automotive after sales would also increase as the EEVs are entering the market place.
There is already increasing demands for repair and maintenance services by an increase in numbers of hybrid vehicles that have been marketed in the last couple of years.
Developing new ones and enhancing the capabilities of the existing automotive SMEs is one of the priority agenda under the NAP 2014.
In support of this agenda, the Malaysia Automotive Institute (MAI) has focused on several pillars of the developmental initiatives with various programmes been implemented.
1. Enhancing the current entrepreneurship among local vendors is one of the important initiatives. Lean Production System (LPS) and  Automotive Supplier Excellent Programme (ASEP) are among the programmes to benchmark the level of capabilities among domestic vendors.
The programme identifies the gaps that exist within the companies and special plans are implemented to reduce the gaps for the companies to excel in the automotive supply chain.
2. Developing new business opportunities is another initiative that have been regularly organised by MAI.
Entrepreneurs, both existing and newcomers, are exposed to new automotive technologies and practices via visit to overseas automotive parts manufacturers, such as those in Japan and Australia.
The programme has received encouraging participation from local automotive industry players enabling them to identify collaboration areas with foreign manufacturers. Collaboration enhances the vendors' competitiveness and makes them more reliable on global automotive supply chain.

3. Creating new business opportunities and entrepreneurs will be futile without sufficient skilled and committed manpower.
In this respect MAI has since developed various industry-led human capital development programmes to fulfill manpower needs. This creates new employment opportunities and enhances existing career development.

3.1 Automotive Graduate Apprenticeship Programme is one of the initiatives to provide broad exposure to undergraduate students in many aspects of automotive manufacturing activities. Students are attached to automotive related industries as early their first year undergraduate education.
3.2 Automotive Industry Certification Engineering (AICE) programme on the other hand provides an extensive one year automotive manufacturing exposure for graduated students prior to their entry into the automotive workforce.
3.3 Industry Led Professional Certificate (IPC) is a customized programme to uplift the skills and capability of automotive operators and technicians to become specialist in the selective area of automotive engineering and manufacturing activities.
These programmes will not only enhance the skill of the workforce but will also broaden their employment opportunities in automotive careers.
Special focus is given by the NAP 2014 in the aftermarket sector which will not only enhance the after sales service quality but also create new business opportunities within the sector, two of which are the automotive parts and components remanufacturing and the recycling business.

Thursday, 12 February 2015

Proton-Adiperkasa MoU goes well with AEC spirit

The signing of a Memorandum of Understanding (MoU) between Proton and Indonesia's PT Adiperkasa Citra Lestari (PT ACL) last Friday, is a positive initiative towards extending the national car maker's automotive manufacturing outside Malaysia.
The MoU calls for a feasibility study to be conducted to explore specific areas of cooperation between both companies. The study will also to examine possible contributions, and to maximise benefits of both nations, towards developing and manufacturing cars in Indonesia.
Indeed, this is a very interesting proposal that will suit well with the spirit of ASEAN Economic Community (AEC), which will materialize on December 31 this year.
Therefore,if the MoU is effectively implemented, the outcome may lead to a significant change in the ASEAN automotive landscape in the near future.
Automotive is a complex industry requiring closely-knitted linkages between Original Equipment manufacturers (OEMs) and the multitiered parts and components supply chain.
Suppliers supplying directly to the OEMs are classified as tier 1 vendors while theirs suppliers,in turn, are tier 2 and down the hierarchy of smaller suppliers of parts and components. Some suppliers serve only one OEM while others serve a variety of customers.
Proton, since its inception in 1983, has been the prime mover towards the development of local vendors to supply numerous parts and components to its assembly outfits
These vendors now have enhanced the entire local automotive manufacturing activities.
The collaborative between Proton and its vendors over the last 30 years has resulted in the establishment of local automotive supply chain community that mostly independent from OEMs dominance.
This non-Proton-centric production among Malaysian automotive vendors will make it easy for Proton and its vendors to work with its Indonesian counterparts to develop their local component supply chain.
Contrary to vertical integration production adopted by most of OEMs, the Proton production concept and its vendors will benefit both nations from the economies of scale.
Proton with its number of vehicle platforms can expedite models introduction of models into the Indonesia market in the shortest time possible.
Joint vehicle design and development to suit the Indonesian market will reduce the assembly times and ease production.
This will help reduce some 20 to 30 per cent of expenses should the time taken to introduced the vehicles to the marketplace be 50 per cent faster than the period of car manufacturing.
Some of the reduction in expenses can be attributed to lower warranty cost, shorter engineering time, tooling availability and shorter testing period.
MAI lauds the collaboration between Proton and PT Adiperkasa Citra Lestari, which is in line with the NAP 2014 overall framework in relation to Investment, technology and engineering, market outreach and supply chain development of Malaysia's automotive industry.
MAI Automotive i-Cloud collaborative platform may be useful to assist local vendors to harness industry information in their respective future collaboration initiatives with its Indonesia counterparts.

Thursday, 5 February 2015

Liberalisation vs protectionism - a tough balancing act

MARKET liberalization of economy is inevitable for our nation to remain respectable and prosper in the global community.
Malaysia, being a small economy, depends largely on its trade with other nations for overall economic sustainability.
Contributing some RM30 billion to the country's gross domestic product last year, the automotive sector is still a key economic engine. More importantly, the sector employs some 550,000 workers, making it an important sector for human capital development and employment opportunities in engineering fields.
The rise of globalization under the World Trade Organisation (WTO) and the need to cement regional trade agreements within the ASEAN Free Trade Area (AFTA) has compelled the government to gradually liberalise the automotive industry in recent years.
Since 2000, the trade requirements under the WTO’s Trade-Related Investment Measures (TRIMs) and the General Agreements on Tariffs and Trade (GATT) have been the limiting factors influencing the automotive policies of developing nations in the region.
TRIMs was viewed as positive towards attracting investment through tax concessions, but it also promotes certain requirements much in favor of foreign investors.
Following the Asian currency crisis, the region's governments were in predicaments to continue with less severe protectionist routes to stabilize their automotive sectors.
Until 2009, Malaysia's first National Automotive Policy (NAP) maintained some protectionist elements that were no longer admissible under the WTO, such as local content requirements by foreign manufacturers.
The government believed that local automotive vendors and original equipment manufacturers (OEMs) still needed some protection to continue to develop to a level of international competitiveness. Being independent of OEMs' influence was continuously encouraged among the local vendors.
Demands for market liberalization heightened as the government was formulating the NAP 2014. In cognizance of the big progress achieved by neighboring countries' automotive sectors on account of their liberalization models, NAP 2014 reviewed the nation's liberalization strategy to suit automotive developments and competitiveness.
One of these is to make the country a regional hub for energy-efficient vehicles production as well as to increase automotive exports.
The NAP 2014's status updates by the International Trade and Industry Ministry recently recorded positive support from industry players who felt that the policy is moving in the right direction, although some major issues still need to be resolved.
Protecting and advancing the 550,000 automotive employments remain the government's priority. However, accommodating mounting demands for car price reduction to ensure survival of home grown automotive OEMs and vendors versus pursuing liberalization commitments will be an extremely challenging balancing act for the government.
The window for protectionist policy will be further narrowed with the onset of the ASEAN Economic Community (AEC) in December 31.
In this respect, it is commendable that Proton has taken an initiative to collaborate with an Indonesia automotive player in the near future. The signing of a memorandum of understanding tomorrow will pave the way for the initiative.
Proton and its list of vendors, which are mostly unattached to automotive OEMs, are in the best position to work with its Indonesian counterpart to develop ASEAN brand of auto outputs.