Thursday, 27 October 2016

Focus on fundamentals key to competitiveness

Previous articles in this column have focused on the need to increase accessibility of the automotive industry to more players, to allow higher penetration of technology based jobs and businesses throughout the nation.
To spur such penetration, government policies need to be structured to reduce economic barriers of entry into the automotive sector, especially for those with  capital disadvantages. The increase of business participation will then further increase employment opportunities and career advancement within the automotive industry.
The 2017 budget has taken the timely direction of strengthening the fundamentals of the economy, with strong focus on the development of skilled talent, as well as small and medium enterprises (SMEs).
Businesses, in particular SMEs, will benefit most from next year's budget through allocations for entrepreneurship, export enhancement and the digital economy. A significant allocation has been announced to make 2017 as the Startup & SME Promotion year.
A key incentive from the budget is a corporate tax rate reduction for SMEs between 1 to 4 points for companies with significant increase in taxable income, and overall reduction by 1 point for the first RM500,000 of taxable income.
This is a significant cash saving measure for companies with an expanding revenue base to further enhance their capabilities in the near future, especially in technology based investments.
Agencies under the Ministry of International Trade & Industry (MITI), Matrade, MIDA and SMECorp will offer RM130 million worth of export promotion programmes under the 2017 budget. Coupled with financing, insurance credit facilities and interest rate rebates mentioned in the budget, a total allocation of RM350 million is available to the advantage of SMEs.
This is a timely announcement to assist Malaysian automotive component manufacturers to initiate their export readiness programmes.
The RM4.6 billion allocation for Technical Vocational Education and Training (TVET) is a good move to strengthen skill based education, essential in enhancing the talent needed within our techno-centric industries, in which the automotive industry is a beneficiary of.
This announcement is a key for the automotive sector, as this is not just a signal of renewed government support for skills development within the industry, but sends a strong message that the key to success is defined by the talents that are unique to individuals. It recognizes that the academic route, albeit very important, is not the only pathway towards career advancement and success.
Specific to the automotive industry will be the Automotive Industry Development Programme (AIDP), which aims to create 7,800 new job opportunities, 190 new businesses, enhance 1,440 existing companies and further develop 5,950 careers within the industry.
The programme, which will work hand in hand with the numerous capacity building programmes developed by MAI since the announcement of the National Automotive Policy 2014 (NAP 2014) will strengthen the wide array of competencies and capabilities of OEMs, vendors, and after sales businesses - addressing core corporate governance and career development in automotive product and process design, manufacturing productivity and quality assurance.
These programmes will push the industry closer to its target of making Malaysia a regional hub for EEVs by the year 2020.
"In a world of constant change, success is the natural consequence of consistently applying the basic fundamentals."
The writer is the chief executive officer of Malaysia Automotive Institute.

Thursday, 20 October 2016

Plenty Of Opportunities In Automotive Industry

Historically, Malaysia's automotive industry began as part of a grand industrialization plan envisioned by the administration of the day.
At the time, there was a huge influx of Malaysian graduates returning from their tertiary studies abroad with qualifications in various engineering disciplines. This spurred the need to place them in key technological positions so that their talents were put to good use.
More than three decades later, the industry has had its ups and downs but nevertheless has bloomed into an industry with more than 20 OEMs, 700 vendors, dealers and distributors, and hiring more than 600,000 workers throughout the automotive supply chain.
It is clear that the tables have turned since the old days - the industry has now come to a point where opportunities within the industry have outnumbered the talents we have to fill them.
The National Automotive Policy 2014 (NAP 2014) was developed with four pillars in mind - job creation, new business opportunities, career advancement and business enhancement. These pillars coincide with the policy's aim for Malaysia to produce 1 million vehicles by the end of this decade.
Since the announcement of the NAP2014, we have seen much traction from local players to strengthen their in-house capabilities in product design, manufacturing and after sales.
As cars and automotive components become more complex, the enhancement of the entire supply chain becomes vital for businesses to compete at the global level. The targeted expansion of market size will also require the participation of more business entities, both in the manufacturing and after sales sectors of the industry.
This drive towards higher value activities naturally creates higher demand for skilled talent, and this goes beyond those well versed with technical knowledge. As the automotive sector is vast and multi-disciplinary, opportunities exist not only for designers, engineers and technicians - but also for logisticians, accountants, procurement executives, salesmen, human resource developers, craftsmen, and computer programmers, just to name a few.
Furthermore, extensive expertise will be needed in jobs and businesses with a more "hands-on" nature, such as welding, machine controls, vehicle and component assembly, quality control, vehicle servicing, production maintenance and remanufacturing, also just to name a few!
To ensure that opportunities in the automotive industry reaches all levels of the country, MAI has established numerous activities and programs for individuals and businesses to enhance their capabilities in automotive specific disciplines. The Industry Professional Certificate (IPC) and Automotive Industry Certification Engineering (AICE) programmes train school leavers, fresh graduates and experienced workers in the knowledge and skills relevant to the needs of the industry.
The Design Engineering & Prototyping (DEP) program, coupled with the MAI Intelligent Technology Systems (MITS) will enhance OEM and vendor capabilities through an integrated technology solution for both the manufacturing and after-sales sectors, from product conceptualisation to vehicle after-sales support.
Programmes such as the Bumiputra Workshop Transformation Program (BWTP) and Dealers Entrepreneurship Enhancement Program (DEEP) are created to enhance the sales and after sales experience of the consumer.
In 2017, MAI aims to further strengthen the automotive industry to create 25,000 new jobs in the automotive sector. 
This also comprises training for 10,000 existing workers, enhancing the competitiveness of over 400 local vendors, upgrading 800 existing workshops, and developing new entrepreneurs in sales, distribution, services, repair, manufacturing, remanufacturing and recycling.
"Development is about more than money, machines or good policies - it is about real people and the lives they lead"
The writer is the chief executive officer of Malaysia Automotive Institute.

Thursday, 13 October 2016

SME evolution vital for automotive industry growth

Since the National Automotive Policy 2014 (NAP 2014) was announced, the local automotive scene has been abuzz with recent developments, from increasingly competitive pricing to enhanced value from players.
Last year, a record total industry volume of 666,674 units was achieved by the original equipment manufacturers (OEMs), supported by the 700-strong vendors, dealers and distribution in the country.
While business performance at the top of the value chain is important, there is also an important demographic that must be addressed to make the automotive industry inclusive to all levels of business - the Small and Medium Enterprises (SMEs) of Malaysia.
According to the Economic Census 2011, SMEs account for 97.3% (645,136) of total business establishments in 2010. Only 6% of total SMEs (37,861) are in the manufacturing sector.
SMEs constitute micro-enterprises - with five or fewer employees and a turnover less than RM300,000, small enterprises - with fewer than 75 employees with a turnover less than 15 million, and medium enterprises - having fewer than 200 employees and a turnover less than 50 million.
Interestingly, most SMEs were micro-enterprises, forming 77 per cent of total SMEs in Malaysia in 2010. Small SMEs accounted for 20 per cent, while medium SMEs made up the balance 3 per cent.
The current figures above demonstrate a significant participation of Malaysians in automotive ventures, but these businesses remain small within the rungs of small revenues and profits.
At the same time, more effort are needed to increase the inclusion of SMEs in car or parts manufacturing.
While we have made significant progress in discussing the high value potential that can be garnered through ventures in the automotive industry, it is also important to dispel the myth that the automotive sector is a "big boys' club", i.e. only large corporations with large investment capital are able to participate in the industry.
It is true that in any sector, larger entities (such as OEMs and major component vendors) have the financial advantage to dominate the top of the value chain.
However, they still depend on a large supply base to ensure the sustainability of their operations. There is no single entity in the world that has the capability to produce every single component in a car, let alone the vast efforts and capital needed to run its sales and after-sales services.
It is within these pockets and gaps in which SMEs can penetrate the automotive sector, in hopes that these ventures grow and gradually join the ranks of larger companies within the value chain.
Business operations such as small component assembly, contract manufacturing, vehicle repair services, body & interior repairs and refurbishing, freelance vehicle sales and automotive recycling are just a few examples of business uptakes for those with smaller working capital.
Nevertheless, the most important aspect when venturing into the industry is a passionate understanding of the required technology, knowledge and skills to produce highly competitive products and services.
There is no amount of capital or equipment that can replace the human capabilities of those working in the company, despite its size.
In enhancing the domestic automotive industry, it is hoped that government expenditure and financial assistance for SMEs to be continued and further expanded in 2017 to accelerate development and growth of SMEs within the automotive sector.
This in turn will contribute to the competitiveness of all businesses in the industry, including the OEMs and Tier-1 vendors.
I also urge all stakeholders to develop those at the lower tiers in ensuring that Malaysia's automotive sector emerges not just a high value sector, but an inclusive one as well.
"Whenever you see a successful business, at some point in the past someone made a courageous decision".
The writer is the chief executive officer of Malaysia Automotive Institute.

Thursday, 6 October 2016

NAP 2014: Industry Growth Goes Beyond Sales Figures

In the previous parts, this series discussed the rationale and framework of the National Automotive Policy 2014 (NAP2014), towards making Malaysia a regional hub for Energy Efficient Vehicles (EEVs) - to further spur investment, technology acquisition and market expansion within the domestic industry.

The direction towards EEV production streamlines efforts towards a unified development strategy for the entire industry. To meet the capacity requirements of an EEV hub, the infrastructure, human talent, production base and after-sales capabilities in the country must be able to cater to the new technological complexities surrounding EEV production and services.

Last year, 32.6 per cent of cars registered in Malaysia were certified as EEVs, which demonstrates not just a strong reaction from the industry in the production of EEVs, but also increased public participation and market consumption of vehicles with a higher degree of fuel efficiency and environmental friendliness.

Despite uncertain economic times, the domestic industry proved stable last year, against all odds, with a total industry volume (TIV) of 666,674 units. Along with TIV, total production volume (TPV) recorded its highest numbers in history with 614,664 units.

Nevertheless, it is important to note that TIV and TPV trends are expected to fluctuate based on the economic situation of the day. The prolonged foreign exchange phenomenon has admittedly affected the industry performance, just like the previous economic crises in 1985, 1997 and 2008.

It is therefore important to fairly assess industry growth beyond sales and production figures, to include its direct and indirect impacts towards higher value gains to the nation as a whole.

In terms of local capacity, the automotive industry has since grown to house more than 700 local vendors, dealers and distribution centres operating in Malaysia, with a total workforce of more than 600,000 talents.

Through the Malaysian Automotive Technology Roadmap, 16 research and development (R&D) projects are currently underway in areas of battery technology, electric bus system, and advance manufacturing. Nine of these projects have completed their respective research phases and are ready for commercialization.

While production centralises around the peninsula due to logistic advantages, we have seen numerous initiatives that serve as in-roads to increase participation of East Malaysians in the automotive industry.

These initiatives include the recent establishment of the Transport Innovation Centre in Kuching, as a node office for R&D activities for sustainable mobility to take place. This year alone, Malaysia Automotive Institute's Bumiputera Workshop Transformation Program and Industry Professional Certificate provided new jobs and business enhancement to more than 100 workshops and 900 semi-skilled workers in Sabah and Sarawak.

These figures, which are merely the tip of the iceberg, demonstrate an increasing, holistic value of the automotive industry based on a design and innovation doctrine, as enshrined by the NAP 2014.

However, the path to success is still long and winded, and it will take more collaborative efforts to fully realise the potential that Malaysians have towards achieving competitiveness in the global automotive markets.

"Coming together is a beginning, keeping together is progress, working together is success"

The writer is the chief executive officer of Malaysia Automotive Institute.