Malaysian Government Abandons Automaker Merger Plan

The Malaysian government backs away from its proposal to merge the country’s two major automakers, replacing the idea with a plan to help them form a strategic partnership in marketing and procurement of parts from local vendors.

International Trade and Industry Minister Mustapa Mohamed says during parliamentary question time that the initial proposal, made in 2010, to merge Perodua and Proton was aimed at creating a stronger entity and strengthening their ability to compete globally.

“The purpose of the (government’s) proposal was to ensure that companies are able to compete not only in Malaysia but also in the international market,” he says. “One of the ways to compete is to increase the scale or number of cars produced.”

About nine months after the recommendation was made, the government stated it could not force Perodua and Proton to merge.

“Things encouraged by the government today are to work together in marketing and also to develop the vendors that supply components to both companies,” Mustapa says.

“There are two programs of cooperation between the companies in the supply chain. This is to increase the efficiency of the vendors who supply components to Proton and Perodua. We know that vendors play an important role. If the vendor is able to manufacture components efficiently, comparative price will make these companies more viable and competitive.”

Mustapa says the government frequently has consulted with stakeholders to make sure  there is a strong automotive policy.

“This is still under discussion,” he says. “We expect (by) the end of this year we will have a better basis to improve the efficiency of the automotive industry.

 “We cannot force consumers to buy a particular car. We have to convince them (of the vehicles’) competitive price and good quality,” Mustapa says. “But these efforts will be continued not only from Proton and Perodua, but (other) companies operating in Malaysia, to enhance their efficiency.”

“There is very strong competition in the country and the local manufacturers have accepted change and are making many changes of their own, alongside improvements to enable them to compete with other brands.”

Asked about the extent to which Proton and Perodua would be affected by competing against each other, especially in terms of income, the minister says the Malaysian companies accept the competition and have made many reforms and improvements.

There are two rivalries, he says: one between the two national automakers, the second between those companies and other brands.

Mustapa says Proton has informed the government that while it now exports only 10,000 to 20,000 units a year, it aims to increase this to about 50% of its production in the next five to six years.