Automotive to Malaysia

Trends and opportunities

The market

With a large market and a significant non-Japanese Original Equipment Manufacturer (OEM) market share, Malaysia presents a wealth of opportunities for Australian companies in the automotive and component manufacturing distribution and operations. Globally, Malaysia imported A$8 billion worth of auto parts and accessories largely into its domestic auto manufacturing industry. Australia exported A$12.6 million worth of auto vehicles and components to Malaysia in 2015 (Source: ITC 2016).

The rapid growth of infrastructural facilities and higher purchasing power of Malaysians as well as political and economic stability have made Malaysia the largest passenger car market in ASEAN.

The Malaysia Automotive Institute (MAI), formed by the Ministry of International Trade and Industry (MITI), acts as a coordinating body for the country’s automotive industry. MAI is mandated to set strategic directions through the formulation of the National Automotive Policy, build cross-industry capacity through targeted training programs, and carry out research and development initiatives.

As part of the Malaysia-Australia Free Trade Agreement (MAFTA) which came into force in 2013, Malaysia and Australia have agreed on implementing arrangements for economic and technical cooperation activities across industries including automotive.

In the automotive sector, MAFTA aims to increase cooperation between Australia and Malaysia, 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’s supply chains. It encompasses three key focus areas: technology, human capital and supply chain.

An example of the technological cooperation under MAFTA has been between Australia’s Cooperative Research Centre for Advanced Automotive Technology Ltd (AutoCRC), Bustech, Swinburne University of Technology, CSIRO and the Malaysia Automotive Institute (MAI) which set a five year cooperative agreement starting in 2013 on a range of research projects focused on sustainable automotive manufacturing, gaseous fuels and vehicle electrification. This collaboration resulted in Australia’s first designed, engineered and manufactured electric bus, with zero carbon emissions and low maintenance costs, unveiled in 2016.

Australian automotive companies and training providers are encouraged to contact AutoCRC to gain further insights into potential export opportunities.

Opportunities

Companies with innovative technology are highly sought after in Malaysia. In fact, Australian companies with good technical know-how are in demand, especially companies with design and testing capabilities. Key opportunity areas include:

  • direct supply of components to automotive vehicle manufacturers and their tier one suppliers
  • partnerships with tier one 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.

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. In 2016, Swinburne University of Technology signed a collaborative research agreement with MAI to establish a joint Transport Innovation Centre (TIC) at Swinburne Melbourne with a hub at Swinburne University in Sarawak, Malaysia.

The Malaysian government encourages investment in the areas of:

  • critical components (engines, transmissions and chassis)
  • auto-electronic components (engine management system and vehicle intelligence system)
  • fuel efficient engines and alternative fuel engines
  • modular manufacture and systems integration
  • research and development, which will enhance domestic technical skills and engineering capabilities.

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.

Among the top 10 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.

Tariffs, regulations and customs

MAFTA has brought about significant tariff reductions for Australian car and auto parts manufacturers looking to trade with Malaysia. 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. Full details of the MAFTA benefits can be found on the website of the Department of Foreign Affairs, in particular under the MAFTA factsheet on goods.

Distribution Channels

Australian companies wanting to distribute their products or services in Malaysia should consider working with local tier one, tier two and tier three 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 and automotive colleges such as International College of Automotive Malaysia or other local universities that offer automotive courses.

Links and industry contacts

Automotive

Automobile Association of Malaysia
Automotive Institute of Malaysia
Malaysian Automotive Association

Government, business and trade 

Australia Malaysia Business Council
The International Monetary Fund
OECD
Malaysia Australia Business Council
Malaysian External Trade Development Corporation (MATRADE)
Malaysian Government Official Portal
Malaysian Investment Development Authority (MIDA)
Ministry of Foreign Affairs
Ministry of Trade and Industry (MITI)
Royal Malaysian Customs Department
The World Bank

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