Mukhriz : Perodua is as Malaysian as it gets

Looks like Daihatsu's outpost in Malaysia, Perodua, is going on a PR overdrive to convince the public (and the government) that it is a truly bona fide Malaysian car company, and thus deserves every bit of protection enjoyed by Proton. Last month, Perodua proudly annonunced that the company is planning to export auto parts to DMC's plants in Japan. Yesterday, two more news hinting at the same objective again made the headlines. The first was Perodua's intention to increase the value of its local parts procurement from the current MYR 3 billion to MYR 4 billion. Next they invited Deputy Minister of International Trade and Industry Mukhriz Mahathir for a line-off ceremony of the 200,000th Viva.

The article had to even include a comment from Mukhriz,
When asked if the criticism by certain quarters that Perodua is little more than a 'rebadge company’ (ie it only puts its badge on a model that is from another company) and therefore should not enjoy privileges like Proton, the Deputy Minister said he disagreed with such a perception. He declared that Perodua models are 'as Malaysian as it gets’ because they have a very high percentage of parts which are purchased locally (up to 90% for the Alza) and the cars are definitely manufactured locally.

He noted that while Perodua’s R&D activities were different from those of Proton, he was confident that Perodua would advance in its R&D capability in coming years as it takes time to acquire the skills. Nevertheless, MITI would continue to support Perodua to help it continue to grow and establish a strong footing in the industry.

Prior to this, there have been rumours that the government intends to revoke national car privileges enjoyed by Perodua. At one time, certain factions of the motoring press have also highlighted the issue. But with Mukhriz's latest comment, Perodua can now bury any criticisms and lobbying from certain quarters to revoke trade protections / incentives currently enjoyed by Perodua.

The critics see protection given to Perodua as a very poor allocation of tax payer's money as they see it as a blatant subsidiy for the largest and richest car company in the world (Toyota Motor Co., which in turn owns Daihatsu Motor Co.) to sell its cars under a different badge at substantially lower prices against other competitors. Why does Japan and the largest car company in the world needs to be given subsidy to sell their cars here, albeit with a different face and badge? When prudent development policies would suggest that we use the resources to instead build grass root industries (i.e. parts manufacturing) and develop the necessary skill base - the combination of these two elements would create what economists call a multiplier effect that would have yielded far more benefits to the country and could even opened up doors of opportunity for other related industries, i.e. aerospace, locomotive, power generation etc etc., rather than to narrowly benefit a select few government linked organizations.

Mukhriz thinks that the company is Malaysian by virtue of its parts procurement and the minimal development work done here. Going by Mukhriz's argument, is Ford of America a Mexican company given that FoMoCo buys so many Mexican parts and even imports cars made from Mexico under the North American Free Trade Agreement? State troopers, and other Federal agents should junk their Ford Crown Vics and use the more American Toyota Camry instead. Red necks in the mid-West should stop cursing at Asians, junk their Ford F-150 and get a made in America Toyota Tundra instead, just remember to check for serious rust though or your fuel tank might decide to hop along the road. But wait, Ford could be Indian too. FoMoCo developed the Figo model solely for the Indian market, and will be built at the company's plant in Chennai, said to be the most advanced in the region. It is of course built mainly from Indian made parts. So Ford has to be Indian. On second thoughts, I think blue oval could be Australian....I remember Aussie taxi drivers swear by their Aussie made Falcons.

Is Toyota an American company? TMC argues that the company contributes so much to the American economy and makes so many vehicles in the USA that some of its models are more American than that of Ford or GM. Is Toyota also a Thai company given that the most of the world's Hilux come from Thailand, plus the Hilux Smart Cab variant is developed entirely in Thailand by Thai engineers. The engines are made in Thailand, the steel plates are stamped in Thailand. So surely Toyota is a Thai company right?

VW of China procures almost 90% of its parts in China. All their major suppliers have plants in China, with VW being their largest customer. VW sells more cars in China than it does in its home country of Germany. The VW Lavida is developed purely for Chinese drivers, and is made in China using China made parts. So surely VW is a Chinese brand and we should tell the Chinese government they can be proud of that and there is no need to develop their domestic brands and Geely can forget about buying Volvo for its technology.

OK I think readers get the drift now and you can see how ignorant are Mukhriz's comments. In the age of the Internet he still thinks everybody is stupid. The point is not just about where are the cars and parts made but where are the profits sent to at the end of the day. And Proton's profits don't get sent back to Japan.

In this interview, Perodua's new MD Aminar Rashid Salleh said "Monetary incentives aside, the business proposition makes sense for Perodua’s principal because Malaysia hosts the largest production facilities for Daihatsu Motor outside Japan, says Aminar." Of course it made sense, we are the only ones stupid enough to give them money to build cars here, while the rest of the world thinks that Daihatsu's miniboxes are rubbish. Even the Chinese consumers, and they have seen a lot of crap there, shun Daihatsu products and DMC shut down its Chinese office in 2009. Just how bad must you be to have to decide to pull out of the fastest growing and largest car market in the world when everyone else is trying to get in? The Vietnamese, and they don't get a lot of sophisticated machinery there, too are not interested in Daihatsu cars and DMC pulled out of the Vietnamese market in 2007.

Perodua's bosses have mentioned many times to the press of how proud they are of the fact that the Japanese at DMC are very surprised that the Myvi still sells so well despite being the oldest model in its product line-up. It even outsells its Japanese domestic market cousins. I find that hardly inspiring, but rather a pathetic statement coming from a company that shouts its market leadership in a market that is almost given to them on a silver platter. These sort of juara kampung mentality is what got Proton into this mess almost a decade ago when it was led by Tengku Mahalel, who proudly announed that his company is Asia's answer to BMW. Will the Myvi still be selling so well in a level playing field? And how different is the current Perodua mentality compared to the fumbling Proton a decade ago? Remember that the locally made Myvi clone, the Daihatsu Sirion, exported by Perodua only sold in tiny numbers in Indonesia. As for Perodua's own badged Myvi exported into Singapore, well the numbers are so low that hardly anyone bothers to tabulate them. Easy success fosters complacency and misplaced arrogance.

Few months ago, one of the fastest growing Chinese car maker BYD intends to make Malaysia its hub for right hand drive model assembly and export, with Berjaya Group as its local partner. But the deal won't be able to proceed until the Malaysian government grants a "manufacturing license" to BYD. But we all know that this is very likely to hit the wall. BYD's F0 model is a loose copy of the Toyota Aygo that competes directly with Perodua's offerings. It is very popular amongst Chinese youths. The Japanese at Perodua and Daihatsu, plus the folks at UMW will lobby hard to protect their interest, and competition from China is certainly not in their interest. This could be a sticky point in the coming ASEAN-China Free Trade Agreement (ACFTA). Unless Malaysia opens up its market to Chinese cars (many of which are small capacity models), the world's largest car market will remain closed to us. Is Perodua going to remain so proud of their export of autoparts to Japan, which is now behind USA, Europe and soon to be overtaken by India as well? Without access to China via ACFTA, Proton's export hopes could be affected. Perodua, on the other hand cannot export to any market without Daihatsu's approval as it does not own the intellectual property of the vehicle. So much for being a Malaysian car huh, one that cannot even be exported without seeking consent from the Japanese.

It is disappointing to know that the government, along with the general public conveniently forgets that besides Proton and Naza, the next most Malaysian car company is the Tan Chong Group, which have been manufacturing cars under the leadership of locals long before Proton or Naza came into being. Back in the 50s, the founders of Tan Chong rode around town in bicycles to sell Datsuns. But of course, Tan Chong got almost no assistance from the government, for very obvious reasons. It's a similar story with Cycle and Carriage, until it was bought over by British controlled but Hong Kong based Jardine Matheson Group.

Footnote : Perodua is 73% owned by UMW group (38%), MBM Resources Bhd (20%), Permodalan Nasional Bhd (10%), and Daihatsu (M) Sdn Bhd (5%). The remaining 27% is owned by Japanese parties — Daihatsu Motor Japan (20%) and Japanese trading house Mitsui group (7%).

Perodua itself doesn’t manufacture vehicles but it owns 49% interest in PACB, the manufacturing arm, in which Daihatsu and Mitsui control 51%. In essence, Perodua controls the domestic distribution arm while holding a minority, but still substantial, interest in vehicle manufacturing.