Daihatsu Perodua Engine Manufacturing Sdn Bhd (DPEM) was officially opened today, providing Perodua with a second plant in Malaysia from which to source locally-manufactured engines. DPEM, which is jointly owned by Daihatsu Motor Co. Ltd. and Perodua, is located in the Sendayan Tech Valley, an industrial park adjacent to Seremban in Negeri Sembilan.
Built with an investment of RM500 million, DPEM is the second significant investment made by Daihatsu in the industrial park following the transmission plant (Akashi Kikai Industry (M) Sdn Bhd) which began operations in July last year. In fact, the two factories are right next door to each other and have been set up with the objective of establishing a powertrain production hub in Malaysia.
While there are a number of engine assembly plants, DPEM is a manufacturing plant which means it makes almost all the parts of the engine at its site whereas engine assembly plants import the various parts and then assemble them.
At this time, DPEM is making only one engine family, the NR Dual VVT-i engine which has displacements of 1.3 litres and 1.5 litres. Since operations began in May this year, some 35,000 engines have already been produced and it was learnt that 90% of the output was taken by Perodua, which uses it in the Bezza sedan.
10% would therefore have been taken by another company and while DPEM officials were unwilling to say which company it is, you can safely assume it would be UMW Toyota Motor (UMWT) as its latest Toyota Vios has the same Dual VVT-i engine.
Sourcing the engine from DPEM in Malaysia instead of importing it from the plant in Indonesia makes sense not only because the factory is closer to UMWT’s assembly plant in Shah Alam but there would also be cost-savings. Perhaps the higher volume of the plant in Indonesia might make the engine a bit cheaper due to economies of scale but the Malaysian government rewards companies that manufacture and source locally and it is almost certain that DPEM has received some incentives.
The incentives would be those provided in the National Automotive Policy (NAP) or the Industrial Adjustment Fund. These would help to offset the production cost of the engine, which will enable Perodua and UMWT to lower the prices of their cars. In fact, with the new Vios, UMWT has reduced the price also partly because it qualifies as an Energy Efficient Vehicle (EEV). That means UMWT gets the EEV incentives provided in the NAP.
DPEM has an installed capacity of 216,000 engines a year on two shifts, which is equals 18,000 engines a month. While most of its output would go to Perodua and some to UMWT, there are also plans to export engines in future. Perodua already exports a number of engine components made at its factory to Daihatsu factories in other parts of Asia (including Japan) so exporting entire engines would be the next step.
It may seem odd that the new engine factory is located far away from the Perodua factory which is to the north, outside Rawang, Selangor. However, it is close to the North-South Highway so logistics are not an issue and it is also close to KL International Airport in Sepang. The new location also means that the workforce can be ‘fresh’ and this is good for a new factory because an existing workforce which has become set in certain ways after many years may find it hard to adapt to newer manufacturing processes. This was why, when Perodua built its second factory, most of the workers were new. Having new workers meant that the culture and mindset would also be different.
Of course, the choice of the Sendayan Tech Valley also pleases the Negeri Sembilan Chief Minister, Dato’ Seri Utama Haji Mohamad Haji Hasan. Apart from the investment, he is happy that the new factory creates additional job opportunities in the area (50% of the workers come from Seremban or around it).
“This investment came just in time as the government – both on state level and federal level – is looking to further diversify the country’s income: in line with the right honourable Prime Minister’s call to reduce dependency on oil industry. The best option is to move towards attracting companies that offer cutting edge technology which will ultimately give added value to the economy,” he said.