Malaysia will relax restrictions barring foreign automakers from manufacturing small passenger vehicles as Southeast Asia's third-largest economy competes with Thailand for investments.
Malaysia will selectively seek foreign investments that bring advanced technology and offer customised incentives to attract companies, according to M Madani Sahari, chief executive officer of the Malaysia Automotive Institute, a unit of the trade ministry. Under the previous policy, the licenses only allowed for the manufacture of vehicles that had engines 1.8 litres or bigger, he said.
"This is a big deal because previously we didn’t issue any licenses" for the manufacture of small cars, Madani, whose unit was involved in drafting the government policy, told reporters in Kuala Lumpur last week.
Effective immediately, the new policy further opens up national maker Proton Holdings Bhd to foreign competition. The drive to attract global automakers also comes at a time when neighbour Thailand is mired in political protests aimed at ousting caretaker Prime Minister Yingluck Shinawatra's government.
Tan Chong Motors Holdings Bhd, a distributor of Nissan Motor Co Ltd and Renault SA vehicles in Malaysia, rose 2% to 5.70 ringgit as of 9.52am in Kuala Lumpur. DRB-Hicom Bhd, the owner of Proton, was unchanged, while the benchmark FTSE Bursa Malaysia KLCI Index dropped 0.5%.
Green Vehicles
"Proton does not lose out on the incentives under the National Automotive Policy, while bracing itself for further liberalisation," Thomas Soon, an analyst at AMMB Holdings Bhd, said in an e-mailed report on Monday. He maintained a buy rating and fair value of 3.65 ringgit for its parent DRB.
Malaysia wants to position itself as a manufacturing hub for energy-efficient vehicles to differentiate the country from Thailand, where foreign automakers have invested to produce pick-up trucks and other vehicles, Madani said.
"By focusing on energy-efficient vehicles, we are also at the same time making Malaysia a center for excellence in technology," he said.
Vehicle prices may fall in Malaysia by as much as 30% by the end of 2018 as a result of local production by global automakers and other government initiatives, he said.
Sales of passenger and commercial vehicles rose 4.9% to 595,300 units in the 11 months ended November, according to the Malaysian Automotive Association. That’s faster than the 2.7% pace in the year-earlier period. The government is seeking to attract automakers that have yet to establish major manufacturing facilities in Southeast Asia for passenger cars, including Volkswagen AG, Renault SA, Hyundai Motor Co, Fiat SpA and some Chinese companies, according to Madani.