This article first appeared in The Edge Financial Daily on July 31, 2018

KUALA LUMPUR: The government’s proposal to impose restrictions on the imports of foreign vehicles to protect the interest of national carmakers, in particular Proton Holdings Bhd, is a move backwards for a country that is trying to ensure a conducive car industry, said Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad.

“It (imposing restrictive measures) is a regressive move for the auto market. I don’t think it is right for the government to put restriction on carmakers, other than Proton, on cars being brought into the country,” Aishah told reporters after a 30-minute briefing with the five-man Council of Eminent Persons here yesterday.

Aishah was commenting on Prime Minister Tun Dr Mahathir Mohamad’s statement earlier in Parliment yesterday that the government was in the midst of studying the new National Automotive Policy (NAP), which could be tweaked to include restrictions on car imports by foreign manufacturers.

The study, he said, will also cover matters related to the development of the industry, including the new national car project, development of local companies, research and development, and increased exports.

NAP blamed for Proton’s loss of market share

The NAP was launched by the previous Barisan Nasional (BN) administration in 2006 to transform the domestic automotive industry and integrate it into the increasingly competitive regional and global industry.

But Dr Mahathir blamed the NAP, which was last revised in 2014, for opening and liberalising the country’s automotive market by removing protectionist measures on national carmakers, while allowing foreign players easy access to the local car market.

“Over the past 10 years, the situation in automotive industry became worse as the government did not monitor the industry and allowed any foreign brands to enter the Malaysian market, resulting [in] Proton losing market share as it could not compete with other car manufacturing giants overseas,” he said in Parliament.

He also said Proton’s deterioration was partly due to deferment of a research and development (R&D) grant from the BN-led government, noting that the final RM1.1 billion R&D grant promised to Proton was only disbursed after China’s Zhejiang Geely Holding Group acquired a 49.9% stake in the national carmaker.

He was responding to a question from Datuk Seri Dr Wee Ka Siong (BN-Ayer Hitam), who wanted to know about the third national car project and whether the government had taken into consideration the problems Proton faced.

Dr Mahathir went on to say that Proton was not a failed venture and that it had, at one point, dominated 80% of the local market, with the company accumulating some RM4 billion reserves and being able to fund the RM1.8 billion cost of building its own plants.

Foreign cars cannot be allowed easy entry, says Dr M

To a supplementary question from Fong Kui Lun (PH-Bukit Bintang) on whether the government plans to impose conditions for the import of cars, Dr Mahathir said foreign cars cannot be allowed to enter the country easily and dominate the local market, and that the government was looking into the matter.

The proposed restrictions, he said, is to create a level playing field for national carmakers. He maintained that the government still supports global free trade.

“Our country allows any imports of foreign [car] brands, but when we want to export our cars, there are many criteria that we need to fulfil, like the Euro Five standard in Europe, and some even make us subject to their agriculture tax. This government will help Proton and the industry,” he said.

To Aishah, setting restrictions on foreign car imports to support the growth of national carmakers is against the spirit of the automotive market liberalisation on which the NAP was based, to create a conducive market by allowing firms to compete on a level playing field.

“That (liberalising the market) is the way forward for the auto industry. If you want to create a conducive auto industry then you have to liberalise the market,” she said, adding that the government should treat all carmakers in the country equally as Malaysia’s economy becomes more open.

By providing a level playing field, Aishah said, Malaysia will be in the right direction to replicate the success stories seen in Thailand and Indonesia, which have more developed automotive markets and strong export strategies catering to global demands.

“Thailand is exporting 1.3 million cars and Indonesia is supplying more than 100,000 cars to the global market. Ever since the government created Proton in 1983, the country’s car exports have been at a mere 20,000 units to 30,000 units, which are much less than our neighbouring markets,” she added.

Regardless of brands and their origins, Aishah said, a car is considered local if it is assembled in that country.

“Even though you are talking about foreign cars in Malaysia, they are highly localised, so our policies should not be discriminatory. Honda, for example, has 70% to 80% local content and they cannot be considered as foreign cars when they have such high local contents and assembled in the country,” she stressed.

Government willing to work with foreign parties on third national car project

On the proposed third national car project, Aishah said the government should reconsider the plan and conduct a thorough feasibility study before going ahead with the idea, as it is a highly capital-intensive venture, while the local market is small, with annual total industry volumes hovering at just around 600,000 unit.

“What we don’t want is further incentives provided for the new national car [company] which [will] really distrupt the industry. It will not help the industry at all,” she added.

During his three-day trip to Japan in June, Dr Mahathir shared his ambition of starting another national car company following the sale of a 49.9% stake in Proton last year to Geely.

Yesterday, when asked if the government would forge a joint venture with an overseas automotive giant to develop the third national car company, Dr Mahathir said the government was willing to work with any external party which had the expertise.

“But, we have to be in control (in terms of equity ownership) and take on a meaningful role in the management of the company,” he said.