DRB-HICOM mulls ‘Asian Car’ project.
This is a momentous occasion. Not just due to the high profile idea. Its huge because it means a lot to us in the region. Its awesomeness is in the fact that someone bought this idea, toys around with it between a few local directors, made a decision and issues out a media statement. Just think about it. It is innovative even just thinking about it. Let us ponder a moment of what a car is. It is a means of transport and for the vain; a status symbol.
Throughout the world, there were foreign auto makers knocking on each country’s door. The Japanese were the earliest to penetrate and be successful at it. Primarily as Asia was a market for industrial equipment. Seemingly these marques delivered reliable products. That is how brands grew back in the good ol’ days. Branding activities were not so active. In late 90’s foreign car makers set up shop in Thailand to produce cars meant for the regional market consumption. Nissan even had made an ASEAN car which was conceived as the Nissan California or known here as the AD Resort. Honda had their City. It was only later that Toyota moved the production of the Corrolla to Rayong. The Thais singled out the Corrolla to become the national taxi. At the same time they built their Kijang in Indonesia and became a well accepted product. Ford-Mazda came in late 1996 and produced pickup trucks. They tried the old Japanese route; selling agriculture workhorses. The Thais in their ingenuity, like the robustness of the pickup but hated its ride. So they decided to do things on their own. Workshops chopped and dropped the ride down to car levels. They made roofs for the back and plugged in side facing seats. In the 90’s Toyota changed their lineup from the mid market Corolla to produce lower rung Tercel. Before the Vios sedan was introduced, the mini MPV Avanza was widely marketed through Thailand, Malaysia and Indonesia. Indonesia with its highly populated cities on mainland Java, were bombarded with vans and mini MPVs. To this day, it remains the biggest market for people movers. They are used extensively for long distance travel. Toyota now has a stranglehold on the MPV market in Indonesia through their subsidiary Daihatsu.
While Thailand became the “Detroit City of the East” automotive enthusiasts in Malaysia blame local government policies for hindering our chance at securing these FDIs. I cannot understand that. If you are a car fan, why does it matter if production was your neighbour. Unless you are a car salesman. You would think having production closer means lower buying cost and bigger margins and/or commission. People have a misconception about Pricing. It was back before the Reagan administration that people used to make a car within costs and adds margins ontop of the cost and therefore sell it at that price. Nowadays, its backwards. People think about the margins that they want, pick a price that people pay, and then work out the cost to make. This reaches beyond just automotive products. With the exception of Financial Services or, if I wanted to be rude; Bankers.
Thailand as a country, sells as much as it buys. It makes 24% than Malaysia does. But it has 300% more people than Malaysia. It has a bigger market size than Malaysia. But the general population is poorer. Does not look good.
Indonesia as a country, makes 200% than Malaysia does. But it has 800% more people than Malaysia. It has the biggest market size but the general population is much poorer. Does not look good.
The region is home to a lot of foreign industries as they realize the need to be close to the market also gives them lower production costs as we are not stringent with labour and environmental rules. Therefore you get a lot of FDIs in the region. But they ensure that profits are repatriated back to their homeland in the guise of foreign income. They could transfer profit into these countries and get taxed lower than if they keep it home. The attraction has always been not just the brick-mortar kind.
But production of somebody else’s trade rights does not make your country rich. Yes, it provides work. But workers don’t elevate themselves in terms of salary more than profit for a few does. Neither do they gain any effective knowledge. The longer one stays on the FDI dependence, the longer it is to get economic independence. If you look at the figures for Thailand, Indonesia and Malaysia, guess which one is the poorest? Detroit of the East. Have you seen what the actual Detroit looks like nowadays?