The J7 by Jaecoo is a Range Rover lookalike at a fraction of the cost. Cars from companies in China are increasing their presence here, in both EV and ICE markets. And that is bound to have major ramifications for the local automobile industry. — Photo: The Star
CHINA has aspirations of global economic domination and automobiles is one sector where it is making some serious headway.
There will be major implications to the sector in Malaysia.
While the West has imposed significant tariffs on electric vehicles (EVs) coming out of China, Malaysia’s only restriction is that the cars are priced above RM100,000.
This is probably to afford local manufacturers, such as Proton and Perodua, some time to catch up with the China EV players.
You can almost feel the onslaught of the Chinese marques coming to town.
This week, the J7 by Jaecoo, albeit an internal combustion engine (ICE) car, was launched. It is a Range Rover lookalike at a fraction of the cost.
Anecdotally, in my neighbourhood in an older part of Petaling Jaya, there is already a BYD sales outlet and two more China companies are setting up theirs — Great Wall Motors (GWM) and Jaecoo.
Jaecoo’s next models coming into Malaysia will be EVs. Jaecoo is the luxury brand of Chery from China, the latter of which already has a large presence in Malaysia.
It is well known how China has secured pole position in car manufacturing globally despite not having a long history in the sector. One of the main reasons is that it didn’t have a legacy industry and so leapfrogged into the EV segment, hiring top car engineers and designers from the world, along the way.
Of course a lot of credit needs to go into the research and development that has gone on in China.
There is also the theory that the China government subsidises many of the country’s EV producers. This is the basis of tariffs imposed by the US and EU on China EVs coming into their markets.
With no barriers of entry of China EVs into Malaysia — except for the RM100,000 price floor — coupled with tax exemptions, expect the landscape to be dominated by China marques.
Competition to China-made EVs in the mid-range segment comes from Telsa. Both Telsa and BYD passenger cars are the hottest selling EVs in Malaysia.
Many Malaysian groups involved in car distribution have sought to tie up with EV producers from China.
Sime Darby is with BYD, Bermaz Auto
will be bringing in Xpeng EVs into the country and Berjaya Group recently inked an agreement with China EV maker Skywell New Energy Automobile Group Co Ltd to establish its brand in Malaysia and South-East Asia.
Perhaps the biggest China-related EV story in Malaysia concerns Proton, which came under the ownership of China’s Zhejiang Geely Holding Group Co Ltd (Geely) in 2017.
Last year, Geely said it plans to invest around US$10bil (RM46.77bil) in Malaysia’s main automaking hub of Tanjung Malim, with a goal to make Malaysia a production hub for EVs, not just for the domestic market but also for export to other South-East Asian countries.
This is much needed.
For now though, Malaysia lags behind in the EV revolution. Not only that, there is the potential that many companies involved in products and services for ICE cars could face challenging times. That is, if you believe the EV revolution is real.
As more EVs are sold, there will be less need for parts and services. EVs have a fraction of the parts that ICE cars have and hardly need to be serviced. Even when it comes to ICE cars from China, local vendors and service providers are largely not part of the ecosystem.
Some of the China ICE marques are being assembled in Malaysia, for example Chery’s Omoda 5 and Tiggo 8 Pro. In these instances, it is not known what the local content is. Insiders say that it is low, which brings us to another aspect of the China automobile story.
What China companies have done very well is that they are used to digital platforms to ensure just-in-time production and delivery of parts. In order words, their manufacturers have been selling their wares on platforms such as Alibaba for years now and the auto industry there has jumped on that bandwagon.
This has shortened their parts supply times and it is likely that this will be expanded to Malaysia as they grow their operations here. Traditional car companies have archaic supply chain systems, which explains the long delays in parts supplies, especially for higher end vehicles.
Many still doubt that EVs will replace ICE cars in a big way.
While that may be moot, what is becoming more apparent is that cars from companies in China are increasing their presence here, in both EV and the ICE markets. And that is bound to have major ramifications for the local automobile industry.
This article first appeared in Star Biz7 weekly edition.
