While we have had a national car company since 1985, truly Malaysian car companies have existed well before Proton. These are companies like Tan Chong Motors, Oriental/Boon Siew, Federal Auto and Cycle & Carriage which were prominent in the car business, with Cycle & Carriage going back to the colonial days. All the companies were started by Malaysians and each became synonymous with a certain brand: Tan Chong with Datsun/Nissan; Oriental/Boon Siew with Honda; Federal Auto with Volvo; and Cycle & Carriage with Mercedes-Benz.
Of the four, only Tan Chong today remains as the distributor of the same brand it began with in the late 1950s, the longest of any company in Malaysia. The other three had helped to grow the business for their principals to the extent that the principals themselves decided to take over distribution and marketing, relegating their local business partners to dealers.
This, however, only occurred in the past 15 years but it is typical in the industry; at some point, the owners of the brand feel that they have to become involved directly to take their brand further, more so in today’s highly competitive environment.
That Tan Chong’s status has not changed in over 50 years is testimony to the good job it has been doing for the brand and indeed, from the mid-1970s till 1985, it put Datsun at the top of the sales chart. In fact, Malaysia was one of the few countries in the world where Datsun beat Toyota and this certainly gave Tan Chong a lot of clout in Tokyo when it came to negotiating prices and specifications. One of the two founders of the company, Tan Sri Tan Yuet Foh, was well known to the Nissan people and of course, highly respected. Old-timers in the company remember him as having a ‘very strong bladder’ and stamina for lengthy meetings, outlasting the Japanese… probably a tactic to get a lower price on the cars!
As a family-run business, it was often noted that the business philosophy was conservative but this is not unusual since owners regard their own money as being at stake. However, the conservative practices have proven wise in times of recession and Tan Chong got through three of them because it was cash-rich, having been prudent in spending at all times. While some companies were forced to take loans to stay in business, Tan Chong got by with its own money, an advantage in such times.
The story of Tan Chong began with a brave venture by two bothers – Tan Yuet Foh and Tan Kim Hor – to import and sell a Japanese brand of cars called Datsun. At that time, in the late 1950s, European models were dominant and Japanese cars were only just beginning to appear. Their design was not much different from the small European models but they were perceived as being inferior. The Tan brothers had no experience selling cars and in their first year of business from a shoplot in Jalan Ipoh, Kuala Lumpur, they sold 39 units. Undeterred by discouraging comments, they figured that if nobody bought the cars, they could still use them in some other way.
Hard work and perseverance was necessary to sell Datsuns during the 1960s. There were still some negative feelings by older Malaysians who had unpleasant memories of the Japanese presence in the country during World War II. The cars were cheaper than the European models but their lightness and thin construction drew remarks that there were ‘made from Milo tins’. According to an industry veteran who sold cars in that era, the infamous ‘Milo tin’ reputation may have come about when a workshop had repaired damaged body panels using scrap metal that included old tins – including Milo tins. He said that it was possible that the repainting was not done properly and people could see some wording underneath.
In 1963, the government indicated that it would make it advantageous for those who were willing to have their vehicles assembled in Malaysia, a move that would help in industrialization and create more job opportunities. Locally-assembled vehicles would be taxed less but would also be required to use locally-made parts if they were available. Nissan, along with a number of other carmakers, quickly began to plan for local assembly and by June 1968, began sending completely knocked-down (CKD) packs of the Datsun SSS to Capital Motors, one of the new assembly plants in Johor. This benefitted Tan Chong as its cars became cheaper and Datsun sales rose quickly. By 1971, however, Capital Motors was sold to General Motors which required all the capacity available so Datsun production was moved to Swedish Motor Assemblies (SMA) in Shah Alam, Selangor.
The Tan brothers fully supported the government’s policy and began to increase the use of local components such as paint, tyres, wire harnesses, batteries, etc. At the same time, seeing how sales were accelerating – Datsun was the best-selling brand in Malaysia from the early 1970s onwards – they also began to consider the possibility of having their own assembly plant. It was a bold but far-sighted plan which became a reality in 1976 when Tan Chong Motor Assemblers (TCMA) began operations in Segambut, then on the outskirts of Kuala Lumpur. The plant was designed with the help of Nissan which suggested that its layout be adapted from the company’s Zama plant in Japan.
A notable process which TCMA adopted was the electro-dipping (ED) system of applying primer to car bodies. In this process, which had not yet been used by other assembly plants at that time, the whole bodyshell (electrically-charged) is immersed in a tank of primer paint, ensuring that every bit of bare metal is covered. This helped to improve the durability of Datsun cars which had, by then, become very popular because of their reliability and economical operation.
By the time Tan Chong was 21 years old, Datsun was a household name. Already a public-listed company (since 1974), Tan Chong had grown so large that when it had its anniversary celebrations, ten separate functions had to be held in Selangor alone, and there were also similar functions in every state in the country. During the anniversary dinner in 1979, Tan Sri Tan Yuet Foh, told this writer: “From what I saw of the range of Datsun vehicles at the Tokyo International Motorshow, and what the competitors will also be selling, I am confident that the 1980s will be good for us but we have to continue to work hard.” For the Tan brothers (and the rest of the family), the success of being No.1 in the market was not taken for granted.
However, what Tan Sri Tan had not expected was the major development in the Malaysian auto industry in 1984 which would impact all car companies and change the automotive landscape. This was the announcement of the National Car project which would be fully supported and financed by the government. The automotive industry was seen to be a potential catalyst for greater industrialization and the government wanted to be directly involved in it so as to manage its development.
Special privileges given to the National Car – the Proton Saga – enabled its price to be RM4,000 lower than the best-selling Nissan Sunny 130Y (the brand name had been changed to Nissan in 1984). Sales of Datsuns as well as other popular brands began to decrease as Malaysians bought Protons. For Tan Chong, this was a very challenging period which required a complete re-think of its future strategies.
Then came ‘endaka’ – the rapid rise in the strength of the yen – which pushed up prices of Japanese products. This added another challenge to Tan Chong which saw its sales drop so substantially that it even had to stop vehicle production for a while. Unsold vehicle stocks grew quickly and as the company ran out of space to keep them, empty plots of land had to be borrowed to park the vehicles all over the country.
Understanding that they were prevented from competing in the lucrative lower end of the market, Tan Chong decided to undergo an ‘image up’ strategy . No longer would it position its products as ‘cheap’ though they were still among the cheapest available after the Protons. There was increased attention given to customer care and facilities were upgraded. Fortunately, the company had a large and loyal base of customers with the cars’ proven reputation for being economical to operate, reliable, long-lasting and also good resale value. Unlike some other brands, Nissan was a brand which a father encouraged his children to buy and they in turn would also do likewise with their children in later years because the ownership experience had been very satisfying.
The dark period of the second half of the 1980s was a blessing in disguise, the old-timers at Tan Chong would later say. It was tough but the employees also learnt to work in a more efficient manner, while the organization became leaner. And as the situation stabilized and then improved, the company bounced back and moved forward again. Lessons learnt were valuable as when another recession hit in the late 1990s, the company was better prepared to cope with it.
Nissan too went through a dark period of its own with financial problems that led to an alliance being forged with Renault in 1999. Over the next seven years, Nissan would focus on its own recovery and as a result, minimal attention was given to the ASEAN region. This meant that new products were few and far between and Tan Chong had to do its best to keep people interested in Nissan models as well as maintain customer loyalty. Through it all, Tan Chong never wavered in its loyalty to its Japanese principal and prepared for growth in the future. It had many other business activities as well but the automotive business would always be at its core.
Though occupying a large chunk of land in the Segambut area, expansion over the years had used up most of the available area and the location of the TCMA had also become rather impractical as Kuala Lumpur was much more congested. The sales volume for Tan Chong had also grown substantially over the years and besides that, like many old plants, the layout of the Segambut plant did not readily allow the use of modern manufacturing processes like modular assembly.
“The new plant is crucial as the Segambut plant alone would not be able to cope with the expected medium-term production and sales requirements. It will play a critical role in the daily business operations of the Group. Going forward and in line with Nissan’s aspiration to increase its worldwide sales volume under the Nissan Global Plan and beyond, the sales volume of Tan Chong Motors is also projected to expand in tandem,” said Tan Chong Motors Chairman, Datuk Tan Heng Chew when he announced the construction of a new plant in 2006.
The new plant, in Serendah, began operations in 2007 and uses modern processes for efficiency, speed and higher quality. The original investment was RM191 million (5.5% of which was contributed by Nissan as a minority shareholder in the plant) and for Phase 2, another RM100 million is being spent. The capacity will then increase to as almost 64,000 units a year with two shifts. As with the current phase, the increase in output will depend on market demand and a second shift will only be activated when needed. The company also has a third plant in Shah Alam, Selangor, which was formerly owned by Ford Malaysia. This is presently inactive but should new developments see greater demand, then it can be quickly tooled up.
It’s been over 50 years since the company has been selling Nissan vehicles and Tan Chong today is stronger than ever and ready for whatever challenges come its way. Its Nissan product line-up has been refreshed and growing volumes indicate very good acceptance by Malaysians. Furthermore, the company, in collaboration with Auto Dunia, is also involved in the marketing of Infiniti, Nissan’s luxury brand. An affiliated company, TC Euro Cars, handles Renault as well.
As the original Malaysian car company, Tan Chong will continue to develop its business here but at the same time, it is also looking beyond Malaysian borders to expand. With its good track record, it has been given the the Indo-China market to develop the Nissan brand and is already assembling vehicles in Vietnam.
There is also a ‘wind of change’ in the company as a new generation of the family begins to become more active in the business. Young and in tune with the times, this new generation has a different attitude from the earlier two generations, and though conservative in some ways, has ‘The Right Stuff’ to face challenges in a marketplace very different from the days when the Tan brothers started the company.
To know more about Nissan products and services as well as Tan Chong Motors, visit www.nissan.com.my