UMW Toyota Motor (UMWT) will resume assembling the Toyota Camry in Malaysia in 2012, most likely when the next generation is launched. The model line had been assembled in Malaysia earlier, from the time it was first introduced in June 1994, but Toyota stopped local assembly when the current generation was launched in October 2006. Though there was speculation that the move was due to the first National Automotive Policy (NAP) announced in March 2006 offering no meaningful incentives for non-national carmaker, Toyota’s official line was that it was done to streamline its manufacturing operations in the region. Always aiming to get the best economies of scale, Toyota would have felt that it made better sense to consolidate Camry production for ASEAN in its huge plant in Thailand, rather than spend extra money for a local assembly operation in Malaysia as well.
It helped a bit, of course, that Malaysia finally agreed to drop import duties to 5% (now 0%) for vehicles from other ASEAN countries under the ASEAN Free Trade Area (AFTA) agreement. Other ASEAN members had done it earlier, as agreed, but Malaysia had cleverly made use of a certain ‘emergency’ clause in the agreement to defer the tariff reduction by a few years. So even though there was a slightly higher cost to importing cars in Completely Built-Up (CBU) form from Thailand, the greater economies of scale probably offset the extra cost and allowed the Camry to have competitive pricing.
|Current Camry imported in CBU form from Thailand since October 2006|
Fast forward to October 2009 and a ‘revised’ NAP (NAP2) said to be more ‘liberal’, though the playing field still remained lop-sided – with no clear picture of when the Malaysian market would become a truly open one where all players could compete in a truly equal manner. Major players like Toyota had waited all year for the announcement, hopeful that there would be something to give them incentive to invest further in Malaysia. Everyone, especially those with popular passenger cars, would like to sell in Malaysia which boasts of having the largest passenger car market in the region but it’s not so encouraging when there are policies that work against them.
Nevertheless, according to T. Hibi, Deputy Chairman of UMW Toyota Motor, NAP2 did have some elements that gave Toyota confidence to put some more money into its Malaysian joint-venture business. “The policy stated that the government will continue to support local production and we were encouraged by that assurance,” he said during a media briefing at ASSB, UMW Toyota Motor’s assembly plant in Shah Alam, Selangor, this morning. Following the NAP2 announcement, he revealed, there was a lot of discussion with Toyota Motor Asia-Pacific (TMAP) which coordinates business activities in the region as to how Malaysia could be included for further investments. It is likely that there was strong support from Toyota City in Japan as one of the senior board members, Dato’ Akira Okabe, has a special affection for Malaysia where he spent six years.
With the assurance that local production would be recognized and ‘supported’, Toyota felt comfortable enough to allow the Camry to be assembled in Malaysia again. There must be a strong business case to do so as it must have taken a lot of persuasion to get the Thai plant to give up Camry production for the Malaysian market (though what it means is that the cars will come in disassembled parts – completely knocked-down (CKD) in industry language – instead of CBU form). It would also have meant that Thai suppliers would lose some business since assembling locally means sourcing more parts locally.
In this respect, Mr Hibi said that greater efforts will be made to develop the local vendor industry to bring it on par with that of the Thai industry in terms of cost competitiveness. He said that Toyota would call upon Japanese parts manufacturers to provide technical assistance to Malaysian vendors so as to make them more efficient and competitive. At present, UMW Toyota Motor buys parts from 65 Malaysian-based vendors, the largest number for any non-national make.
Investment for resuming local assembly of the Camry will be around RM100 million but additional investments of some RM70 million will also be made over the next three years to upgrade the plant in terms of efficiency and quality. The upgrade will see ASSB, which began operations in 1968, going from the present installed capacity of 67,000 units/year to 75,000 units/year by 2012. Mr. Hibi said that 75,000 units are about as much as can be produced by the plant due to limitations of land area and regulations. While there are no plans for a second plant, additional capacity is available at Perodua which currently does contract-assembly of the Toyota Avanza for UMWT.
|Hiace van made in Malaysia is exported to Thailand|
In anticipation of increasing volumes, UMWT will also spend about RM200 million on a new complex in Bukit Raja, Selangor. This complex, to be completed by mid-2011, will have a centralized stockyard and a test track as well as carry out activities such as accessory fitment.
That Toyota is willing to make such investments in Malaysia demonstrates its commitment to helping the automotive industry advance. It’s an initiative that does not seem to be recognized in any meaningful way; instead, Toyota and other non-national carmakers are still being regarded as merely ’screwdriver operations’ that are of no benefit to the country. It’s probably forgotten by government policy-makers that when the government urged carmakers to assemble models locally in the 1960s and transfer technology as well as help Malaysia industrialize, Toyota and other Japanese carmakers were quick to start up CKD operations, creating thousands of a new jobs.
Toyota has certainly made big investments in Malaysia and over the past 5 years, almost RM290 million has been invested in manufacturing facilities which include seat, exhaust system, steering system and even body stamping. UMWT also exports between RM600 million – RM700 million (2009 figures) worth of Malaysian-made parts to Toyota plants in other countries. As a further show of support, Toyota exports Malaysian-made Hiace vans to Thailand and even more significantly, is the only non-national company to set up a body-stamping plant (Toyota Auto Body) here. The plant, located in Shah Alam, makes body panels for the Vios as well as other plastic parts and will soon also be making some parts for the Hilux.
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To know more about Toyota models or corporate activities in Malaysia, visit www.toyota.com.my
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