• Madani Sahari

Lesson's from Malaysia's auto-industry and data-driven decisions

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In times of crisis, the natural instinct for humans is to hope for the best-case scenario, but plan and prepare for the worst.

However, in planning for the worst case, one may often find difficulty in predicting the future, and missing new opportunities that may diminish any possibility to achieve best case scenarios. I do not plan to predict the future in this article, but perhaps this piece will help us to avoid missing those opportunities.

There is a famous adage - to predict the future, look back at history. This simply means to prepare for both positive and negative potentiality, we must look back at our foundations.

When the National Automotive Policy 2014 (NAP 2014) was launched, there was a lot of debate on whether or not the lofty goals set by the policy was realistic. It targeted more than a million in vehicle sales domestically - with the underlying push for growth in domestic participation in higher value processes such as fully-fledged product and process design.

The policy placed a high premium on true domestic value - Malaysians participating in automotive design, engineering as well as increased sophistication in the manufacturing of vehicles and components.

As time progressed, we got many things right but some tangential. While domestic sales peaked at around 666,000 units in 2015, the appreciation of the US dollar and economic uncertainty caused some disruption to this promising record, stagnating the domestic volume to the circa 600,000 level for the next few years.

However, the surprising number was the rapid increase of parts and components exports - rising from around RM1 billion at the start of the decade to RM13.1 billion in 2019, signalling a strong performance, not from the usual heroes of the industry - the carmakers - but this time, from those whose ecosystem the carmakers depended on: the component suppliers.

By the end of 2019, a significant number of Malaysian vendors achieved Level 5 status - capable of designing their own components and the required tooling to support production.

It would be ideal if we could better predict how fast trends would change. Within a short span between 2015 to 2018, the rise of connected mobility made its mark on a global scale, with autonomous vehicles, mobility as a service and industry 4.0 becoming the new buzzwords of the global automotive sector.

We reacted swiftly. MARii (MAI at the time) quickly developed capabilities to assist the industry towards a transformation in business thinking, deploying technologies such as additive manufacturing, big data management and other elements of smart industry to the sector.

Fast forward to this year - an important year conceived three decades ago for Malaysia, which unfortunately transgressed into a global health pandemic and likely, if we are not careful, an economic crisis.

Here is the silver lining to this twist of events: despite the impacts of the pandemic, the Malaysian total industry volume (TIV) surged to higher-than-expected levels recently, a promising end to a tough year. Perodua, Malaysia's largest shareholder of the domestic passenger car market, announced that September was its biggest monthly sales in history.

It is a given that the recent moratorium on hire purchases, coupled with the government's sales tax exemptions for the remainder of the year has helped sales. However, on top of that - I personally don't believe it was just consumers chasing a deadline.

In my previous article in this column, I spoke of Malaysia's ecosystem for future mobility development.

The National Automotive Policy 2020 (NAP 2020) identifies new trends and technologies - for investors, technology developers and businesses towards the digitalisation of the sector.

New elements include Next Generation Vehicles (NxGVs), Mobility as a Service (MaaS) and Industrial Revolution 4.0 (IR4.0); they are key directions for the connected mobility sector.

When asked on MARii's own podcast channel, Frost & Sullivan's Vivek Vaidya commented that the NAP2020 would not have been possible without the foundation provided by the NAP2014.

Looking back at the work that we have put into the last four decades, as well as the specific re-directions in the last six years, it has made our predictive models - and more importantly, our countermeasure planning - a lot more precise than before.

In June this year, the government rapidly developed a model to estimate the required vehicle sales for the domestic industry to survive from the impact of the movement control orders instituted due to the COVID-19 pandemic. The model produced an estimated requirement of half a million vehicles a year.

Through careful consideration and consultation with the industry, the government agreed this year to exempt sales and services tax for new vehicles - leading to the sales increases seen in the second half of this year. With around 341,489 vehicles sold by the end of Q3, the final push for vehicle sales over the next month may just see the half a million unit target reached.

Without a strong management foundation by the industry players, coupled with data driven decision making on the government's behalf, we would not be on our way to meeting the 500,000-unit line of survival mentioned earlier.

Most importantly, such a data driven decision not only addressed a sales target, but also allowed the entire ecosystem to plan for future demands, instead of being overly cautious and struggling in panic.

Such is the power of digitalisation - a decision to utilise data five years ago, perhaps has dampened current shocks, for a while. To keep this momentum going, the reconciliation of data remains key in realising possible positives in such an uncertain short-term future.

MARii has developed several turnkey solutions for more industries to model their future as we wade through these tough times. Please contact us for more information

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