LOCAL NEWS

Patrick Debrot, vice-president Renault Asia-Pacific

Local assembly of the Kangoo at Tan Chong Motor Assemblers. In 2007, this will be transferred to a new plant outside Rawang, Selangor

Malaysia will be the manufacturing hub for Renault in the ASEAN region and the company does not envisage the need to establish a similar facility in any other neighbouring country. This was confirmed by Patrick Debrot, the company’s vice-president for the Asia-Pacific region, who met the Malaysian media this morning to update them on developments.

Mr Debrot explained that though Thailand is a popular choice for many other automakers, Renault considers Malaysia more suitable because it has the largest passenger car market in the region and therefore more potential to market the Renault’s range of products which are primarily passenger cars and light commercial vehicles.

"We don’t have a pick-up and as you know, Thailand is mostly a pick-up market so if we were to try to penetrate that market, we would still be having a market potential of only about 50% of the whole market. However, in Malaysia, our range of products can be sold to 75% of the total market," he said.

In the immediate future, though, Renault will focus only on selling in Malaysia while it builds up the amount of local/ASEAN content in its Kangoo which is assembled locally by Tan Chong Motor Assemblers (TCMA) in Segambut, Kuala Lumpur and distributed by TC Euro Cars Sdn Bhd. By 2007, a new plant will start operations on a site outside Rawang, Selangor, and by then, it is expected that the local/ASEAN content level will reach 40% which is the minimum level to qualify for the preferential tariffs of AFTA (the ASEAN Free Trade Area Agreement). This will enable exports from Malaysia to other ASEAN countries to begin.

Of course, it is also dependent on the Malaysian government’s schedule for bringing import duties down to 5% for ASEAN-sourced vehicles. At this time, it seems that Indonesia has shown its unhappiness at the non-preferential tariffs being applied to vehicles exported from that country to Malaysia and has imposed reciprocal tariffs on Protons exported there this year.

Like most multinational automakers, Renault is respectful of the policies of the countries it wants to do business in and adapts accordingly to the conditions. Mr Debrot said that he understood that the Malaysian government had a need to protect its national car and adopt a ‘standalone’ approach with respect to AFTA. However, he viewed the National Automotive Policy (NAP) as being a ‘step forward’ to an open market.

"I see that the government is offering opportunities for us to develop the market so it is interesting to Renault. In due course, I am sure the market will become open because Malaysia would also wish to enjoy free trade with other nations so we just need to be patient,” he said although he expressed a wish to see the AP policy ‘improved’ to enable Renault to import more cars and broaden its offerings to Malaysians.

"The conditions may be difficult in a protected market but we assess the long-term potential and if there is a good business case, we will come in. Our experience in entering protected markets has shown that if our presence is well established early, we can be in a strong position when the market eventually opens up," he said.

In establishing its base in Malaysia, Renault is satisfied with its local partner, Tan Chong Motors, which is the parent company of TC Euro Cars. When asked if Renault has plans to set up its own subsidiary here, Mr Debrot said that the relationship with Tan Chong Motors was a good one and furthermore, the company had been a loyal and trusted partner of Nissan for many decades, Nissan being a partner in the increasingly successful Renault-Nissan Alliance.

The choice of the Kangoo as the model with which the company would begin its market development was due to its suitability for a broad range of applications. It has been well accepted by Malaysian buyers and furthermore, it is a simple model with low maintenance costs – in some cases even lower than Japanese cars - and of course, the pricing has been attractive.

Next year, Renault and TC Euro Cars are looking at broadening the range so there are likely to be new models and also variants of existing models. It is clear that having just one strong seller in the Kangoo is not enough and variety is needed. Mr Debrot would not reveal which models are being considered but when asked if the Logan (a low-cost model made in India at the Mahindra factory) might be among them, he said that was not ruled out. However, he added that it need not be a sedan bodystyle and could be some other version on the same platform.

Of the Renault-Proton relationship in which the French company has been supplying engines and gearboxes for the Waja and more recently, the Savvy, Mr Debrot said it is handled by a subsidiary (Renault Moteurs) which his division is not directly associated with. Nevertheless, he offered the observation that the relationship – which he said did not involve development work – had been useful for Renault’s engineers because it had given them a chance to understand local expectations and conditions. This, of course, benefits product development of its own models for this market in future.

He said that as far as he knew, there is no further business deal after the Waja and Savvy projects but it all depended on Proton and whether they wish to initiate anything else.

With Renault and Nissan sharing platforms on some models, it would seem that customers would opt for the Nissan version which is likely to be cheaper. Mr Debrot said that he did not see this as being likely because of the different brand values and he also pointed out that while in Malaysia, we may see Japanese products as cheaper than European products, it was not the case in Europe.

He said that the challenge for Renault in a country like Japan, where pride in their own domestic brands is strong, was to demonstrate that Renault was as good and reliable as Japanese models. This took time because Japanese values of fuel-efficiency, reliability, ease of repair and durability have all been so well established. With the Renault-Nissan Alliance and the representation of Renault by Nissan, it has helped the company’s sales because Japanese people feel that they can get the levels of after-sales support.

"Yes, it has helped and although Renault has been sold in Japan for a very long time, it is only in 2005 that we will enjoy the best-ever sales volume," he said.

What about the F1 successes? Have these helped sales? Mr Debrot said that it varied from country to country although it certainly was good for the brand image. “In Switzerland, Spain and Australia, sales do increase after a Renault wins but it is not the case in all countries." He added that customers benefit from the efforts put into the F1 program because new technological solutions are found and some of them eventually get into production models where appropriate.

"Perhaps a model like the Kangoo would not need to superior braking system of a F1 car but what is important to note is that our engineers will have development process which is advanced and can enhance the development of different products in our range," he explained.