Malaysia NAP 2014 – The gist of the policy document

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I’ve been in the corporate world for more than a decade now and one of things I absolutely abhor is the bosses calling for a yearly review and my entire team gets mobilized to put together some background info of what our objectives were, what we’ve done, where we are now and what more do we need to do. Then, it’s the bosses’ turn to take your beautifully crafted business plan apart and crush it till it’s worth nothing more than a pile of dirt and, in the process pulverize your self esteem until you don’t even know your family name.

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After reading the National Automotive Policy 2014 document, I can’t help but wonder if it’s being put together by a couple of college students with the help of Wikipedia and some sleepless nights powered by Red Bull. And if a guideline like this was presented to any automotive bosses like those who went for the announcement event today, you can be sure the person responsible for putting this document together would be out in the streets looking for another job now.

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It goes to show how badly planned and executed the NAP 2014 is. But first, let’s have a look at the nutshell of NAP:-

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•  Established in March 2006, revised in 2009, current is 3rd revision

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• Objectives in first revision: encourage domestic automotive market to be more competitive and resilient, establish Malaysia as regional automotive hub, encourage local manufacturing capabilities and value added services, encourage higher levels of automotive exports and competitive related components, encourage greater competitive and thorough Bumiputera involvement in domestic market and protect the interest of consumers by offering safe and high quality products at reasonable prices.

• Objective of NAP 2014: same as before with addition of completing the domestic automotive industry in the areas of manufacturing and after sales

• Current performance between 2009 – 2013: increase of vehicle sales from 536,905 unit to 652,120 units. Increase in automotive investments from RM700mil to RM3bil (Jan-Oct 2013) in which RM2.3bil is domestic and RM700mil are foreign investments for the recorded period in 2013. Automotive trade is not improving where imports are higher than exports. 2012 saw a deficit of RM16bil where RM21.7bil are imports and exports only amount to RM5.3bil. In the same year, exports of components and spare parts is RM4.3bil while vehicle exports is only RM700mil.

• In the Asean circuit, Malaysia ranks third after Indonesia and Thailand with Thailand leading with 2.45mil vehicles manufactured in 2013.

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Now, to what NAP 2014 is all about:-

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Consists of 3 Core Directives (involving Investments, Technology & Engineering and Market Expansion) and 3 Core Strategies (involving Component & Spart Parts Supply Chain Development,  Human Resource Development and Safety & the Environment)

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Core Directive: Investment

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• Establishment of Malaysia as EEV hub through strategic investment and high technology adaptation by automotive companies for domestic, regional and international markets by 2020.
• By international definition, an EEV is defined as a vehicle that fulfills a set of specifications determined through it’s fuel efficiency (litres/100km)  and CO2 output (g/km) and this includes fuel efficient vehicles, hybrid, EV and alternatively fueled vehicles such as CNG, LPG, Biodiesel, Ethanol, Hydrogen and Fuel Cell. Technical specifications of the use of energy is as follows:-
• The standard in which fuel efficiency is measured is based on international standards as adopted by Europe, America, China, Japan, South Korea, Thailand and Taiwan) and will be discussed with local automotive industry players. This adaptation allows for a strategic and high technology investment.
• The standard of fuel efficiency will be used as reference and updated inline with the development of the Green Automotive Technology Industry Guideline which will be established by the Malaysia Automotive Institute (MAI) with the assistance of related government agencies.
• At this moment, EEV is only based on the standard fuel efficiency rating while the standard for carbon emission will be used when the Euro 4M petrol and diesel fuel qualityis introduced. A thorough study on the use of Euro 4M is being conducted with consultation with industry players and related government agencies.

• Actions under Investments includes issuing new licenses for manufacturers of EEV vehicles, maintaining current policy of issuing new manufacturing licences for non EEVs, a “customized” incentive to encourage strategic investments for strategic sector growth so that the automotive ecosystem can be improved. Among strategic sectors are engine, transmission & ECU, die and mould, aluminium mould and non-ferrous.

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Core Directive: Technology and Engineering

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• Emphasis on technology and engineering for strategic sectors such as engine, transmission, control unit, die and mould, aluminium mould and non-ferrous, engineering design and prototyping, testing facilities for components, sub systems and vehicles, plastic engineering and automotive grade steel manufacturing.
• Everyone is talking green so NAP 2014 has decided on actions that includes increasing the use of green technology, increasing strategic cooperation between Malaysia and FTA allies, local companes with International Center of Excellence as well as between local companies and local universities in the field of green technology. In addition, NAP 2014 focuses on increasing the R&D and D&D expertise and establishment of relevant green technology infrastructure.
• Actions under Technology and Engineering includes import and excise duty exemption from 1 Jan 2014 – 31 Dec 2015 for hybrid CKD models and until 31 December 2017 for electric CKD vehicles. CKD manufacturers of hybrid and electric vehicles will be considered for customized incentive which, among others is based on the level of strategic investment by the company covering amount of investment, output level, technology transfers, R&D activities, establishment of supply chain, job opportunities and export numbers.
• Incentives in the form of Soft Loans and tax exemptions 

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The above are bold targets and like most reviews in the office, the lower staffs would always present slides that look nice in a Powerpoint. The question is, even if we do manage to set up multiple EEV plants and aims at exporting a significant amount of the targeted 1.15mil EEVs, who we going to sell it to? Unless car prices here are reduced significantly (something with the Minister himself has said it will not happen in the near future), these are all meaningless numbers. And without stimulated sales, how then can there be more job opportunities when we can’t consume enough of what we produce?

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Exports? Who’s going to buy? Thailand and Indonesia? What makes you say the government of those countries are going to welcome Made-in-Malaysia cars with open arms when our government has not been doing that?

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Oh, did I also mention that the government is reviewing the abolishment of the AP system due in 2015? Funniest announcement I heard on the radio this morning; “The government is going ahead with its plan to abolish the AP system in 2015 but this is subject to a thorough review by the ministry and relevant parties”. So, is that ON or OFF? APs are one of the most damaging policies affecting our automotive market. Where serious players invest in R&D and service centres, these people only need to worry about warehousing. Where proper companies have proper marketing and sales team managing the business, AP holder companies need to update Mudah, OTO.my or Carlist and probably place some Facebook ads here and there. It might be argued who is the main beneficiary of the AP system but the effect of discouraging large automakers in investing and establishing a greater presence here cannot be denied. And if you’re wondering why is the government making a U’turn and re-examining the decision on getting rid of the AP, perhaps this article can shed some light to the matter:-

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Is AP helping us or screwing us big time?

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In conclusion, the NAP 2014 creates more questions then answers. It has a tendency to lead us astray more than guiding us clearly to the future. While the current global automotive market isn’t as solid as a golden brick road, I can’t help but feel the NAP 2014 is nothing more than a piece of document for short term gains by politicians who may or may not have their own agenda. If the public were the boss of the government, when can we fire those at the top?

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