IT has been seven years since Nasim Sdn Bhd was appointed the exclusive distributor of French marque Peugeot in Malaysia. However, the fiercely competitive environment and pricing issues have kept the unit of the privately held Naza Group in its niche market, sandwiched between the mainstream Japanese offerings and the luxury German marques.

Within the niche market, Nasim-Peugeot finds itself competing against German player Volkswagen Group Malaysia Sdn Bhd (VGM). VGM’s localisation strategy has made its offerings more price competitive. However, issues with its gearbox have somewhat affected sales.

According to Malaysian Automotive Association (MAA), Nasim’s Peugeot was ranked 17th last year, having sold 5,498 units. This was substantially below VGM’s 8,916 units (ranked 12th) and even behind luxury marques Mercedes-Benz and BMW, with 6,952 units (ranked 14th) and 7,808 units (ranked 13th) respectively.  

In an interview with The Edge, Nasim chief operating officer Datuk Samson Anand George says the cost of owning Peugeot cars commands a premium of between 10% and 12% over most Japanese brands.

The cars are competitive and affordable with a touch of European quality, he adds.

Would the sourcing of completely knocked-down (CKD) packs or components from Peugeot’s enlarged operation in China, rather than from Europe, help make its pricing more competitive?

“Pricing is our biggest challenge because we have to account for many factors in order for us to be competitive in the premium but affordable segment. Perhaps, importing components from China could reduce cost and eventually, prices, but that is something for our principal to strategise on.”

Peugeot’s focus on China has produced strong results. In 2014, Asia sales grew 41.6% to 393,508 units, from 277,918 units in 2013. Industry players say the carmaker’s growing its manufacturing presence and supply chain in the republic could benefit its regional operations.

During the same interview, France’s Peugeot SA general director for Asean, Lionel Faugeres, outlines the group’s strategy in Malaysia. It will focus on strengthening its product positioning with core models that come with competitive net pricing, enhancing its distribution channels, improving its manufacturing capabilities and eyeing pockets of opportunities in emerging markets.

“We chose Malaysia as our Asean (manufacturing and export) hub to expand our industrial strategy by offering the right products that meet the needs here. Part of our strategy this year is to wait for the full roll-out of cleaner diesel (Euro 5) in September. Hopefully, we can offer more new models with competitive internal combustion engines,” he says.

Faugeres adds that Peugeot, through its collaboration with Nasim, will continue to maintain Malaysia as its Asean hub, although it is eyeing emerging markets such as Thailand, Myanmar and the Philippines for manufacturing ventures with local partners.

Last year, Peugeot collaborated with Truong Hai Auto (Thaco) and established a manufacturing plant in Vietnam to assemble left-hand drive vehicles, beginning with the 408 model.

Commenting on the sales performance in Malaysia, Faugeres says the current sales of some 6,000 units represents a healthy growth. “Sales has been growing from a few hundred units when we started seven years ago. Malaysia generated 80% of total sales of 7,000 units in Asean last year. Despite a few issues here and there, overall, we are quite satisfied with the performance here. But, of course, we want more,” he says.

In 2014, sales of Peugeot vehicles fell 15.48% to 5,498 units due to inventory issues that resulted in inadequate supply. Meanwhile, only one model was launched, the 3008. “2014 was a quiet year as we were busy resolving inventory issues, planning for appealing models to be introduced to the public, as well as consolidating our business so that we can ramp up our business in the coming years,” Samson explains.

This year, Samson expects Peugeot’s sales to book a modest 10% growth to 6,000 units, which he says will be driven by the new 308, 408 and 508 models, which will be launched soon. (The new 308 had been launched at press time). “2015 is a promising year because we will be launching three new models. This will put us back on the track,” he adds.

Samson remains “modest but optimistic” about the lower sales target for this year, which is 7% lower than its sales in 2013, given the uncertain global economic conditions, negative sentiment on the implementation of the Goods and Services Tax (GST) as well as stiff competition.

“At the end of the day, there is still growth in our business. With the uncertain global economy and challenging operating environment, I would rather be objective in setting our sales target. We are cautious but we will tread a steady path and chalk up healthy growth along the way,” he says.

According to Samson, Peugeot has a 15% to 18% market share of European cars sold in Malaysia. Nasim aims to make Peugeot one of the top three European brands in the next three to four years. The mainstream European brands in Malaysia include BMW, Mercedes-Benz, Audi, Volkswagen, Peugeot, Citroen, Renault and Volvo. Peugeot and Citroen are under the PSA Peugeot Citroen Group. Citroen is also represented by another unit of Naza Group in Malaysia.

Nasim’s sister company Naza Automotive Manufacturing Sdn Bhd — located on a 140-acre site in Gurun, Kedah — assembles three brands: Kia, Peugeot and Citroen. The plant was established in May 2004 with a combined capacity of 50,000 units. Between 5,000 and 6,000 units of Peugeot models are assembled annually, says Samson.

“The plant is currently running at 50% capacity. We are eyeing mass manufacturing of some models, drawing our experience with the popular 208 model. To this end, we have allocated RM20 million in capital expenditure (capex),” he adds.

For the financial year ended Dec 31, 2013 (FY2013), Nasim’s net profit slid 42% to RM25.19 million from RM43.35 million in FY2012 and revenue declined 1.67% to RM734.86 million from RM747.28 million in FY2012. As at Dec 31, 2013, the company’s total assets stood at RM552.43 million against total liabilities of RM445.58 million.

This article first appeared in The Edge Malaysia Weekly, on April 13 - 19, 2015.

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