Frankly Speaking: ‘Pero-tiga’ must benefit Malaysia

This article first appeared in The Edge Malaysia Weekly, on August 12, 2019 - August 18, 2019.
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As it turns out, DreamEDGE Sdn Bhd — the Cyberjaya-based company spearheading the new national car project — used to be 52.63%-owned by VentureTECH Sdn Bhd, a unit of government agency Malaysian Industry-Government Group for High Technology (MIGHT). Since early 2017, however, VentureTECH has held only a 10% stake in the company, according to a 10.10pm statement last Friday by DreamEDGE founder, CEO and major shareholder Khairil Adri Adnan. DreamEDGE has “secured the funding from a private investor” as well as the technology to develop the new national car, he said without providing details.

The third national car project, dubbed

“Pero-tiga” for lack of an official name, is described on MIGHT’s website as an industry-driven, public-private partnership initiative that aspires to drive new economic growth via sustainable knowledge and technology acquisition. It is not clear if the desired technology will be from DreamEDGE or its technology partner Daihatsu Motor Co Ltd, which has 30% equity interest in the second national car company, Perusahaan Otomobil Kedua Sdn Bhd

(Perodua), but will reportedly not have equity in the new venture.

The first prototype — said to be a C-segment sedan — is expected to be ready by March 2020 but details are scarce on a number of important questions. For starters, what will be its unique proposition? The local market has enough internal combustion engine and hybrid vehicles. Adding to that variety is questionable unless the offering propels the industry forward, such as with electric vehicles, which Thailand — Southeast Asia’s largest automotive manufacturing nation — is still trying to do.

Can the new automotive company compete overseas or will it merely be eyeing a share of a small and crowded local market? Will it need preferential excise tax (read: make other cars more expensive) to gain cost advantage here?

Thailand produced just over two million cars last year, more than one million of which are exported — a number that accords it economies of scale. Malaysia’s car market is largely domestic. Just over half of the 600,000 passenger and commercial vehicles sold in Malaysia last year were by Perodua and Proton, the first national car. Malaysia has thus far had more success in exporting automotive components and even that is a mere fraction of the giant next door.

If Pero-tiga needs concessions to only gain a slice of the local market, its promoters need to return to the drawing board as Malaysia cannot afford another bailout.

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