Automotive to Malaysia
(Last updated: 3 Apr 2013)
Trends and opportunities
The market
Malaysia has a vibrant automotive industry and is the third biggest producer of vehicles in the ASEAN region after Thailand and Indonesia. The industry has steadily developed since the Malaysian government introduced policies in the 1960s to promote the automotive sector, in an effort to create employment, strengthen the country’s industrial base, and reduce its dependency on the agricultural sector.
In 2010 Malaysia imported RM11.2 billion worth of cars and RM5.5 billion of car parts and components, and in turn exported RM938.2 million worth of cars and RM2.6 billion of car parts and components. Its major export destinations are other ASEAN countries like Thailand and Indonesia, but large quantities are also sold to China, Syria and the United Kingdom.
The Malaysia Automotive Institute (MAI), formed by the Ministry of International Trade and Industry, acts as a coordinating body for the country’s automotive industry. MAI is mandated to set strategic directions through the formulation of National Automotive Policy, build cross-industry capacity through targeted training programs, and conduct and oversee research and development. MAI’s ultimate goal is to enhance the competitiveness of Malaysia’s automotive industry and make it among the most competitive manufacturing countries in the region by 2015.
There are 28 manufacturing and assembly plants producing passenger and commercial vehicles, composite body sports cars as well as motorcycles and scooters in Malaysia. Malaysia has more than 690 automotive component manufacturers, producing a wide range of components, such as body panels, brake parts, engine parts, transmission and steering parts, rubber parts and electrical and electronic parts. Of these manufacturers there are approximately 45 Tier 1 suppliers, which are the target group for collaboration with Australian industry due to their capabilities, access to vehicle manufactures in Malaysia and need for design and innovation expertise to remain competitive.
The Malaysian automotive industry has two large national carmakers – DRB Hicom (Proton) and Perodua – which make up 58 per cent of total production and represent a source of great national pride. In all, there are three local manufacturers, nine foreign assembly plants with operations in the country, and more than 800 component manufacturers. Malaysia’s automotive industry ranks 24th in the world based on vehicles produced (Source: International Organization of Motor Vehicle Manufacturers (OICA)), with 569,620 units produced in 2012.
Vehicle production in Malaysia
| Year |
Passenger Cars |
Commercial Vehicles |
4x4 Vehicles |
Total Vehicles Produced |
| 1980 |
80,422 |
23,805 |
- |
104,227 |
| 1985 |
69,769 |
37,261 |
- |
107,030 |
| 1990 |
116,526 |
63,181 |
11,873 |
191,580 |
| 1995 |
231,280 |
45,805 |
11,253 |
288,338 |
| 2000 |
295,318 |
36,642 |
27,235 |
359,195 |
| 2005 |
422,225 |
95,662 |
45,623 |
563,510 |
| 2006 |
377,952 |
96,545 |
28,551 |
503,048 |
| 2007 |
403,245 |
38,433 |
- |
441,678 |
| 2008 |
484,512 |
46,298 |
- |
530,810 |
| 2009 |
447,002 |
42,267 |
- |
489,269 |
| 2010 |
522,568 |
45,147 |
- |
567,715 |
| 2011 |
488,261 |
45,254 |
- |
533,515 |
| 2012 |
509,621 |
59,999 |
- |
569,620 |
(Source: Malaysian Automotive Association)
Opportunities
The Malaysian market is relatively small compared with neighbouring Indonesia (it has an adult population of just under 20 million), but its population is expected to grow by more than 50 per cent by 2050. Its proximity to the rest of South-East Asia, both geographically and economically, make it an ideal entry point for Australian companies looking to access other ASEAN markets.
Malaysia’s Economic Transformation Programme (ETP) sets out the Government’s policy priorities for propelling the country up the global value chain. While the automotive sector is not one of the 12 key economic areas identified in the ETP, two areas that are - business services and electronics – involve initiatives that should affect the types of vehicles produced in Malaysia and the way in which they are built. Malaysia’s push to achieve developed-nation status by 2020 is likely to have a significant impact on the auto industry, as it seeks to become a major producer and exporter of higher-value electric and hybrid vehicles, and as local manufacturers seek to improve the technology of their vehicles through partnerships with international parts manufacturers.
The Malaysian government encourages investment in the areas of:
- critical components (eg. engines, transmissions and chassis)
- auto electronic components (eg. Engine management system and vehicle intelligence system)
- fuel efficient engines and alternative fuel engines
- modular manufacture/systems integration
- research and development, which will enhance domestic technical skills and engineering capabilities
Major opportunities will flow to Australian companies across a number of different areas of the Malaysian automotive industry following the signing of the Malaysia-Australia Free Trade Agreement (MAFTA), which entered into force on 1 January 2013. Under MAFTA there will be zero import duties on auto components sent to Australia, while the import duties on shipments to Malaysia will be capped at 30 per cent. Duties on small cars will be reduced to zero by 2016.
With a large market and a significant non-Japanese Original Equipment Manufacturer (OEM) market share, Malaysia presents a wealth of opportunities for Australian companies. Companies with new technology are highly sought after in Malaysia. Australian companies with good technical know-how are especially in demand from the local industry, as well as companies with design and testing capabilities. Key opportunity areas include:
- direct supply of components to automotive vehicle manufacturers and their Tier-1 suppliers
- partnerships with Tier-1 suppliers in lightweight material technology and modular integration for supply to OEMs
- technology collaboration on electric and hybrid vehicles and engineering design across all components
- investment in areas of fuel-efficient engines and alternative fuel engines, conversion kits, transmission systems, automotive electric components and special purpose vehicles
- collaboration with local vendors to supply ASEAN and global markets
Another area of significant opportunity exists for Australian education providers around human capital development, in particular working with local and foreign automotive companies in Malaysia to develop training and skill upgrading programs that enhance productivity and product quality. For example, in March 2012, Kangan Institute signed a Memorandum of Understanding with MAI to help build skills in the Malaysian automotive retail, service and repair sector, building on existing educational ties between both organisations, which had previously worked together to deliver a skills building program to automotive trainers and lecturers from local colleges and universities in Malaysia.
As part of the MAFTA negotiations, both countries agreed an Implementing Arrangement for Economic and Technical Cooperation Activities across automotive, agriculture, tourism, clean coal technology and electronic commerce. This component of MAFTA aims to increase cooperation between Australian and Malaysian automotive sectors, with Australia leveraging its technological expertise to help Malaysia grow its own capabilities, while positioning Malaysia as a gateway for Australian companies to penetrate the rest of ASEAN. The Implementing Arrangement encompasses three key areas: technology, human capital and supply chain.
A major focus of the cooperation is between Australia’s Cooperative Research Centre for Advanced Automotive Technology Ltd (AutoCRC) and MAI which have a five year cooperative agreement on a range research projects focused on sustainable automotive manufacturing, gaseous fuels and vehicle electrification. Australian automotive companies and training providers are encouraged to contact AutoCRC to learn more about these and other collaborative projects and gain further insights into potential export opportunities.
Competitive Environment
The dominance of national carmakers is expected to decline in the near future due to liberalisation from the ASEAN Free Trade Agreement, and other agreements like the MAFTA, which should encourage competitiveness in the Malaysian automotive industry.
Partly due to historical reasons, while national carmakers DRB Hicom (Proton) and Perodua make up the majority of the market, Japanese automakers still play a large role in the market, although not to the degree seen in other South-East Asian countries.
Among the top ten commercial vehicle brands six are Japanese (Toyota, Nissan, Mitsubishi, Isuzu, Hino, Daihatsu), and two are Malaysian (HiCOM-Perkasa and Inokom), with the remaining two being American (Ford) and the European owned Mitsubishi-Fuso (Daimler). Other European actors in the Malaysian market include passenger car makers BMW, Volkswagen, Peugeot, Volvo, Audi, MINI, Renault (also has a 43.4 per cent stake in Nissan), Land Rover and Porsche. Commercial vehicle manufacturers Volvo Trucks, Scania and MAN are also active.
2012 Vehicle Production Share by Sales Group
(Source: LMC Automotive)
All companies are using a significant proportion of components in their local assemblies from other ASEAN countries such as Thailand and Indonesia, so Australian companies should consider how to inject themselves in the supply chain by making links into those countries as well as into supply chains within Malaysia.
Tariffs, regulations and customs
As discussed above, the MAFTA has brought about significant tariff reductions for Australian car and auto parts manufacturers looking to sell into Malaysia. Full details of the MAFTA benefits can be found on the Department of Foreign Affairs website at www.dfat.gov.au/fta/mafta/, in particular under the MAFTA factsheet on goods. A brief summary is as follows:
Australia’s offer to Malaysia
- Elimination of 100 per cent tariffs
Malaysia’s offers to Australia
- Parts and components – immediate tariff elimination
- New completely-built-up motor vehicles with petrol engines exceeding 2000 cc or diesel engines exceeding 2500 cc – immediate tariff elimination
- New completely-built-up motor vehicles with smaller engines - will be phased down and eliminated in 2016. Tariffs will be 15 per cent in 2013, 10 per cent in 2014, 5 per cent in 2015, 0 per cent in 2016.
Although certain tariffs were eliminated under MAFTA, Australian companies wanting to export their products to Malaysia should check with the Royal Malaysian Customs Department for any other incidental costs or charges that may be incurred. Companies can visit the website at http://tariff.customs.gov.my and key in the HS-Code in the tariff finder to search for any applicable costs or charges. The import duties imposed on foreign manufactured cars are set out on the Malaysian Automotive Association website at www.maa.org.my/info_duty.htm.
Marketing your products and services
Market Entry
Australian companies who are interested in exploring opportunities in Malaysia’s automotive sector are encouraged to work with local organisations where appropriate. Partnering with local organisations (following extensive research and due diligence) will give a competitive edge to Australian companies to leverage local expertise, knowledge and networks. Malaysian companies are generally open and receptive to new products and services and Australian companies with new technology and good technical know-how, design and testing capabilities are in high demand from the local industry. However, long-term success will require an Australian company to put in the time to build trust and rapport. If you are planning to export to Malaysia, be prepared to visit Malaysia regularly, follow up on previous visits, learn about local cultural issues and prepare information packs to profile your company, and your products and services.
Distribution Channels
Australian companies wanting to distribute their products or services in Malaysia should consider working with local Tier 1, Tier 2 and Tier 3 suppliers in Malaysia and local OEMs such as DRB Hicom (Proton) and Perodua. Partnerships, joint ventures and consultancy routes are the most effective distribution channels. Tapping into industry associations such as the Malaysian Automotive Association, Automotive Institute of Malaysia and Automobile Association of Malaysia is also a good strategy to build relationships, identify partners and distribute your products.
In relation to human capital development services, Australian companies should consider working closely with industry associations, automotive colleges such as International College of Automotive Malaysia or other local universities that offer automotive courses.
Links and industry contacts
Automotive-related resources
Malaysian Automotive Association – www.maa.org.my
Automotive Institute of Malaysia – www.mai.org.my
Automobile Association of Malaysia – www.aam.org.my
Government, business and trade resources for Malaysia
Malaysian Government Official Portal – www.malaysia.gov.my/EN/Pages/default.aspx
Malaysian External Trade Development Corporation (MATRADE) – www.matrade.gov.my/
Malaysian Investment Development Authority (MIDA) – www.mida.gov.my/env3/
Ministry of Foreign Affairs – www.kln.gov.my/web/guest/home
Ministry of Trade and Industry (MITI) – www.miti.gov.my/cms/index.jsp
Royal Malaysian Customs Department – www.customs.gov.my/index.php/en
Australia Malaysia Business Council – www.ambc.org.au
Malaysia Australia Business Council – www.mabc.org.my
OECD – www.oecd.org/countries/malaysia/
The World Bank – www.worldbank.org/en/country/malaysia
The International Monetary Fund – www.imf.org/external/country/MYS/index.htm
Please note: this list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only.
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
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