AFTA: The upcoming challenges to the Malaysian automotive industry
AFTA and Malaysian car industries
Proton and Perodua are really going to feel the threat of AFTA if they are not prepared by the year 2005. Government has helped them by deferring the AFTA from 2003 to 2005. So now it is up to the local manufacturers to come out with their own remedies to face AFTA. The truth fact is that nobody can escape from liberalization of car industry in this region.

From my opinion, Proton has already started preparing for AFTA. But is it enough? Sales have been projected to drop significantly for Proton once AFTA is implemented. One of the measures taken by Proton is in R & D sector. They have come up with first Malaysian design car. This is a milestone in Proton, which was realized using latest technology like Rapid Prototyping and commitment by the employees. Proton is also doing research and development with Lotus engineering and Petronas-Sauber Formula 1 team to come up with own engine. This moves in R &D sector is very important for them. Now they can show their own identity to the world rather than copying prototype of Mitsubishi cars. They have changed to a new logo that will give them more precise identity. Perodua still lack in this field, they still come out with Daihatsu prototype cars to manufacture in Malaysia.

Local manufacturers have to come with their own identity or brand if they want to penetrate the ASEAN market. In order to have own identity, they need to come out with their own model that is not available from other auto manufacturers. Daihatsu have already manufacturing base in Indonesia. So for Perodua it will be difficult task to penetrate the ASEAN market. Definitely their sales in Malaysia will drop in 2005. So to compensate that, they better penetrate other ASEAN countries car market.

Another main core thing that should be taken action is cost competitiveness. Cost control is very important. Our local cars cost is very high compare to the actual price of foreign car without tax and tariffs. Even Datuk Seri Rafidah Aziz has urged Proton to cut cost of the local production. If they want to be global distributor than their price should be competitive among car giants. Even though our capacity is small compare to other car giants, but if they want to challenge them then they have to cut the cost. Proton has informed that the new model Proton WAJA parts are 90 percent locally made. This is a good sign for local part manufacturers. However are the local parts cheap compare to foreign suppliers. However they should get alternative choice to reduce cost. Maybe they can buy some parts from other countries that are significantly cheap compare to local parts.

Another main thing that Proton should consider is quality of the car and its parts. Currently our car quality is not even par with foreign cars. So how are they going to go global? Quality is very important because most consumers will look into the quality of the car before purchasing them. They should improvise their quality of car. They should be strict in quality control. Even to maintain the local sales they have to maintain the quality and upgrade them to be higher than foreign cars. Proton car owners knew the quality of Proton cars before they buy the car. They didn't consider the quality because the cost was more important to them. Since Proton and Perodua was the cheapest and economical, they bought the car.

Finally before penetrating other ASEAN countries, local manufacturers have to have a well planned marketing strategy to sell the car in the ASEAN region. They should come up with some partnership in these ASEAN countries to market their cars. Local distributors in ASEAN countries are more reliable and trustable since they know their market well. The collaboration should be enhancing the marketing strategy and method to penetrate this ASEAN region. From my opinion, I think R&D with own design, cost control, quality control and marketing is the four main items that local car manufacturers should concentrate. They should use all four management principles, which is planning, controlling, organizing and leading to implement these tasks. The principles are very important for them to implement their plans and run them successfully.

Lastly I would like to say that AFTA is a threat to local manufactures but it is an opportunity to many new Malaysian companies. They can actually negotiate with foreign giants to invest in Malaysia and open up a joint venture company. With joint venture it would be a win-win situation where both local and foreign companies can benefit from the project. Honda Motor Corporation just formed a joint venture project with DRB-HICOM and Oriental Industries in July 2000. Both local companies have 51 percent share while HONDA has 49 percent. DRB-HICOM is actually a parent company for Proton but they are planning to sell the stakes to PETRONAS. This is because their debts are very high. Now they have formed an alliance with HONDA so that they are not out of the car industry. This is considered a good move because this joint venture project will benefit all parties involved. I think some other companies can follow this footstep to form a joint venture company with other auto giants like Toyota, Ford, Volvo and others. If they don't offer themselves than Thailand will grab these entire joint venture project and gain most from AFTA.