AFTA: The upcoming challenges to the Malaysian automotive industry

Conclusion
Proton and Perodua are two main local car manufactures. Their sales are mostly in domestic market. There were able to capture 90 percent of the total market because of trade tariffs and custom tax that is imposed on all foreign cars. However things won't be the same when AFTA is implemented. It is a threat for these two local companies. AFTA main objective in auto sector is to reduce tariffs for assembled cars and components to less than 5 percent by the year 2003. But this was deferred to 2005 because of request by Malaysian government. Other non tariff barriers and protection to local manufactures also should be abolished by year 2005. This indicates a big threat to local companies. Foreign car giants are interested to invest in this region because of its attractiveness and opportunities. The demand for car will increase significantly in this region because of growing nations and high economic growth forecasted. Populations very high in this region and potential young people who are able to buy cars are very high. ASEAN countries have potential of becoming the fifth largest market in the auto sector as an integrated market. High GDP growth in this region compares to world average makes this region more interesting to the foreigners. Currently many Japanese and US base companies have invested in this region. They are more car giants interested to invest in this region. Finally Proton have to take measures in to be more competitive among in this auto sector by the year 2005. They have to invest four main core items which is, technology, own design, cost control and quality control to be more effective in competing with other auto giants. They need to use the four main management principles to implement their projects. With these they will be able to overcome the challenges of AFTA and liberalization. If these measures are taken then they would definitely reduce the impact of AFTA on their sales. Other potential companies in Malaysia should negotiate with foreign giants to come up with joint ventures in Malaysia.