Just like any large industry, the success or failure of the automotive sector is the dynamics of an entire supply chain or network.
Naturally, any major change will prompt even more changes within the supply chain.
When Proton announced is partnership with Geely recently, many were quick to point out how this would affect the local supply chain.
Some even spoke of extreme devastation of local business - that we’d lose everything to foreign powers, remain slaves of our own economy and so on.
Some say the government would swoop in to assist all vendors, and there would be no cause for concern at all.
Let’s just ignore the extreme ends of the spectrum and focus on the middle ground.
Firstly, let's address the elephant in the room – would there be any impact on the vendors?
The short answer is yes. However, before we throw our arms in the air and cry foul, allow me to clarify what those impacts are.
The Proton-Geely partnership may be a first step in the right direction for the national brand, but from the government’s standpoint, it is a continuation of our journey towards a globally competitive automotive industry.
The National Automotive Policy 2014 (NAP2014) has, since its announcement, made supply chain development and competitiveness a key ingredient to balance our need for growth and creating choice for the consumer.
Last year, exports of parts and components reached RM 12 billion, demonstrating our growing competitiveness and participation in the global value chain.
Therefore, the impact to vendors is simple – those who are competitive have a better chance at expanding their markets, something that may have not been possible since the national car maker started losing their market share.
Whether or not the impacts are positive, the good news it is now ever more in the full control of the vendors, and not limited to the challenges of low volumes.
At the end of the day, we are in business.
True entrepreneurs know that business relation is merely a byproduct of knowledge and capabilities, and not the other way around.
As local vendors, we have the massive advantage of logistics, and as operations are still within our borders, the only thing that will hamper our efforts are our capabilities.
A wise man once gave me an interesting analogy on business. To bake a good cake, it needs a good recipe, a good mould for shape, and good baking equipment. Anybody can buy baking equipment and bake the cake, not many can make the mould, and fewer can create a delicious recipe.
A good recipe is rare, but baking equipment is replaceable. To remain competitive, be the person who holds the recipe. Finally, would you rather have a small cake to yourself, or take a portion shared from a bigger cake?
Let’s not forget this is not the first time a national carmaker established a foreign partner. More than a decade ago, many predicted the demise of local vendors when Perodua entered into a partnership with Daihatsu Motor Co Ltd.
Today, all seems to be happy with their annual production volumes and Perodua is buying from the local vendors at a total amount of RM4.5 billion a year.
The key to staying relevant is to know what your customers want.
The writer is the chief executive officer of Malaysia Automotive Institute.