THE automotive sector's transformation map has and will continue to make Malaysia competitive, even with challenging free trade pacts like the Trans-Pacific Partnership (TPP), which Malaysia hopes to be a member.
Signs of steady improvement in the sector have been showing in the past decade since the Asean Free Trade Area (Afta), Japan-Malaysia Economic Partnership Agreement and the Malaysia-Australia Free Trade Agreement (FTA), enabling Malaysia to be on the same page as the leading automotive countries in the world.
"(Global) competitiveness is what we have been preparing for. Right from Afta, the government has been liberalising the industry," said Malaysia Automotive Institute chief executive officer Madani Sahari.
With Afta, for instance, there is nothing to stop automotive manufacturers from using Indonesia to sell their vehicles to the Malaysian market.
Both the trade pacts with Japan and Australia, which come into effect in 2016, will see zero import duties for vehicles from these markets.
The National Automotive Policy (NAP), which is undergoing its second revision after the first in 2006, has paved the path towards liberalising the industry further by extending licences to energy-efficient vehicles (EEV) for all vehicles.
The EEV, which is veered towards green technology and is non-pollutant based, is a distinctive advantage for the Malaysian market and the impact is also being felt among local manufacturers like Perodua and others like Mazda.
Honda, he said, has recognised the potential of the Malaysian automotive industry and decided to pursue its investments in the local EEV segment, following its decision to divest its operations in Thailand.
"It realised that Malaysia offers the whole spectrum to support the development of EEV like the hybrid, diesel and petrol vehicles. Thailand, for example, offers only an eco-car policy by way of incentives for the 1.2-litre diesel and 1.4-litre petrol vehicles."
The International Trade and Industry Ministry is currently processing several EEV manufacturing licence applications from European, American and Japanese automotive players.
For 2013, Malaysia can expect RM2 billion investments from Chinese automotive players as their manufacturing and research and development (R&D) hub in the Asean region.
"Be reminded that these OEMs (original equipment manufacturers) are not eyeing the passenger car segment in Malaysia per se as they are looking at bigger markets.
"They don't find it viable to build a manufacturing plant here to serve the Malaysian market. They are looking at us in the context of access to bigger markets like Asean.
"If we don't have an FTA (which involve import duties, quotas and non-tariff barriers) in place we will lose out. Being in the TPP will provide the bigger spread for us," he said in an interview ahead of the 19th round of TPP negotiations in Brunei on Thursday.
The TPP initiative, a discussion hotbed among Malaysians, also involves Australia, Brunei, Canada, Chile, Mexico, New Zealand, Japan, Peru, Singapore, the United States and Vietnam.
The automotive issue will be a key topic during the negotiations in Bandar Seri Begawan and is also expected to be discussed at a session in Singapore next month.
"We are prepared to negotiate the TPP and we have started discussions with Perodua and Proton."
Madani said it is important for Malaysia to get into the TPP negotiations now while it can still do so.
As to the revision of the NAP, he expects the remaining part to be announced later this year. Apart from a reform of excise duties for completely knocked down and completely built up vehicles by way of sustainability components, it will focus on enhancing the competitiveness of the industry, especially the 500-member vendor community serving the OEMs.
The FTA with Australia has enabled Malaysia to benefit from its future technology R&D to develop long-life lithium-ion batteries for the EEV.
How do these developments impact Proton and Perodua?
"They need to transform now. Perodua has been aggressive in reducing prices because it reduces operation costs," he said.