Peugeot and Kia franchises could help put Bermaz Auto in big league, observers say

This article first appeared in The Edge Malaysia Weekly, on October 26, 2020 - November 01, 2020.
Sources say BAuto is the front runner for the franchises because of its success in growing the Mazda brand in Malaysia. (Photo by Suhaimi Yusuf/The Edge)

Sources say BAuto is the front runner for the franchises because of its success in growing the Mazda brand in Malaysia. (Photo by Suhaimi Yusuf/The Edge)

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THERE is talk that Bermaz Auto Bhd (BAuto) will be awarded the franchise rights for the Peugeot and Kia models in Malaysia, taking over from the Naza Group, which has confirmed that it is letting go of the marques.

Sources close to BAuto say the group is in negotiations with the respective principals in France and South Korea for the franchises.

BAuto is not the only automotive group that is interested, however, in the franchises. “BAuto is in discussions with a few parties, but the principals are also talking with many other parties. Among them are Sime Darby Motors Sdn Bhd and DRB-Hicom Bhd.

“It is not so easy to take over the franchises. There are many things to consider, and the bidders are in no hurry, with the current pandemic,” says one of the sources with knowledge of the negotiation process.

Sime Darby Bhd says, however, that it is not vying for the distribution of Kia and Peugeot (see “Sime Darby reaps dividends from early move into China” on Page 20).

Other sources say BAuto is the front runner for the franchises because of its success in growing the Mazda brand in Malaysia, since the group secured the distributorship rights in February 2008.

If the rumours turn out to be true, the move could be just the catalyst that BAuto needs to join the big league of the local automotive industry, say industry observers. While it has been successful in growing the Mazda brand, it is in a relatively niche market.

Market leader Perusahaan Otomobil Kedua Sdn Bhd (Perodua) is part of the UMW Holdings Bhd group, which also holds the distributorship of Toyota models in the country. Meanwhile, runner-up Proton Holdings Bhd is a 50.1% subsidiary of DRB-Hicom Bhd, which has the distributorship rights of Honda cars in Malaysia.

At the peak, BAuto sold 15,844 Mazda cars in Malaysia in the financial year ended April 30, 2019 (FY2019), helped by the sales-tax holiday between June and August 2018, as the then Pakatan Harapan government reverted from the Goods and Services Tax (GST) regime to the Sales and Services Tax (SST) structure.

On a calendar year basis, 16,038 Mazda cars were sold in 2018, representing 2.7% of the total industry volume (TIV) of 598,714 units during the year.

In FY2020, however, BAuto’s sales dropped to 11,709 units from 19,004 in the preceding financial year, owing to a delay in the delivery of the new CX-5 and all new CX-8 models.

BAuto attributed the delay in delivery to the protracted resolution of certain pricing issues. The last quarter of the financial year also coincided with the Movement Control Order (MCO) period, which started in mid-March.

This delay in delivery, coupled with the artificially high sales recorded in FY2019, led to a 30.4% year-on-year drop in BAuto’s revenue to RM1.76 billion. As a result, its profit before tax (PBT) plunged 61.2% y-o-y to RM132 million, while its net profit tumbled 61.8% to RM100.8 million.

Over the last nine months, 7,842 Mazda cars were sold in Malaysia, which made up 2.3% of the TIV of 341,489 units, according to data compiled by

“As an automotive group, BAuto is exploring opportunities to expand its volume whether internally or externally. This is the motivation behind its bid for the distributorship rights of Peugeot and Kia,” says an observer.

Are the Peugeot and Kia distributorships profitable, though?

Based on the latest financial results filed by Nasim Sdn Bhd, the importer and distributor of Peugeot cars, with the Companies Commission of Malaysia (CCM), RM378 million in revenue was recorded in the financial year ended Dec 31, 2018 (FY2018).

Nasim’s PBT in FY2018 was RM3.08 million, down 63.6% y-o-y. Meanwhile, it recorded a net profit was RM1.35 million, up 4.1% y-o-y.

In 2018, only 2,302 Peugeot cars were sold in the country. It can be assumed that, in 2019, Nasim would have registered lower revenue and profitability, as only 1,897 Peugeot cars were sold.

Meanwhile, Naza Kia Malaysia Sdn Bhd, which distributes Kia vehicles, posted revenue of RM527.7 million in FY2018, compared with RM518.75 million in the preceding financial year. Over the last five years to FY2018, Naza Kia registered the highest revenue in the industry, and hit RM1.034 billion in FY2015.

That was also the year the company registered a net profit of RM32.2 million. In the latest financial year, Naza Kia managed to record only RM80,000 in net profit, according to SSM data.

In 2018, 5,658 Kia cars were sold in the country, according to data compiled by In 2019, the numbers dwindled to 3,432 units. In view of the dwindling sales, it can safely be assumed that Naza Kia’s profitability also declined in 2019.

Talk that Naza is looking to let go of its distributorship rights of Peugeot and Kia cars comes as no surprise to many, as it has been going around over the last two years.

“Negotiations by BAuto to get the Kia distributorship started two years ago,” says a source. Owing to the complexity of the deal, however — including talk that Naza was looking to first clear its holding stock — it was delayed.

Although the automotive industry has seen some recovery over the past several months, BAuto’s share price has lagged that of its peers.

Since March 20, its share price has risen 23.8% to close at RM1.17 last Friday, valuing the group at RM1.36 billion at a trailing 12-month (TTM) price-to-earnings ratio (PER) of 22.98 times.

UMW’s share price has rallied 34.7% since March 20, ending at RM2.37 last Friday, valuing the group at RM2.77 billion at a TTM PER of 10.01 times. Meanwhile, DRB Hicom’s share price has risen 86.7% since March 20, closing last Friday at RM1.96.



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