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Auto industry recovering fast [16-06-2011]  
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he launch of the new Perodua Myvi tomorrow marks another milestone for national carmaker Perusahaan Otomobil Kedua Sdn Bhd (Perodua). More importantly for Malaysia’s automotive sector, it is a sign that things are returning back to normal after supply disruptions caused by Japan’s devastating March 11 earthquake and tsunami.
Indeed, the automotive industry is expected to recover faster than expected, with local automakers seeing their production returning to pre-disaster levels.

Local automakers UMW Toyota Sdn Bhd and Perodua were among the carmakers that were affected, but have since seen their production resume to normal levels as supply from Japan improved.

However, some quarters are still expecting a poor set of 2QFY11 results due to the temporary setback in that quarter.
“April and May were relatively slow for both these companies as they had certain parts imported from Japan. There was also uncertainly on how long the supply disruption was going to last. However, the principal companies in Japan have made it their main priority to supply their parts here due to the strong demand in Southeast Asia,” said an industry source.

As early as last month, Perodua said that its production levels were improving and were expected to return to normal soon. However, the launch of the new Myvi replacement model that was postponed from April created some doubt in the market.

“At that time, there was a lot of uncertainty. The Myvi has been the best-selling model for Perodua and it definitely hurt sales when the launch of the replacement model was postponed. And production of the Myvi model was also discontinued,” said the source. However, doubts were cleared when the new launch date of June 16 was announced at end-May.

“The new launch date is good news, as it was earlier expected to be sometime in September,” he added. The new model will be launched tomorrow.  
Already Perodua has begun receiving orders.

There were reports that the waiting period might be two month long due to supply shortage. But this was quickly dismissed by one of Perodua’s auto parts suppliers.
“This is impossible as Perodua has already begun earnest production of the new model with its capacity already running at 90%. I do not think Perodua can afford to under-deliver its promise as there is a strong demand and (high) expectations for the new model,” he said.

Perodua expects monthly sale of 8,500 units of the new model, and is confident of achieving its sales target of 195,000 units for the year.
“Part of the early launch date is also Perodua’s attempt to maintain its market leader position ahead of Proton. In any case, the new model will have great demand as there are no direct competitors for its class and price range in the market,” said the source.

Apart from Perodua, UMW Toyota Motor has also resumed its two-shift productions since late May. This is mainly due to efforts by its principal company in Japan to ensure supply of parts to this region.

“We are delighted that with the strong efforts taken by our principal, Toyota Motor Corp and all related parties including our suppliers, we can resume normal production earlier than expected,” said UMW Toyota Motor president Ismet Suki in an earlier statement.
The current plant is said to be running at 80% capacity at the moment, and will return to full capacity as early as next month.

As for Honda Malaysia Sdn Bhd, the company said production at its Alor Gajah plant would only resume two shifts in August.

Apart from that, it is planning to extend its operating hours to make up for the shortage of supply from April to July. The firm is running at single shifts due to supply shortage.
Its managing director and CEO Yoichiro Ueno said Honda associates in Japan have worked tirelessly with suppliers to normalise supply of component parts from Japan.
“Hence, we are pleased to announce that we are able to resume full production much earlier than previously expected,” he said in a recent statement.
The local auto parts makers are also seeing clearer skies ahead.

Delloyd Ventures Bhd deputy CEO Datuk Leon Tee said things are looking brighter after the decline in orders from Perodua and Toyota for April and May.
“Orders from Perodua were badly hit in April when it dwindled to 1,000 units. This was also because the Myvi replacement model was was postponed due to supply issues. However, things are improving as we received an order of 7,000 units for June. It should increase to 8,000 next month,” Tee told The Edge Financial Daily.

He added that there would be no problem for Perodua to ramp up production to make up for the shortfall in April as it has the extra capacity. “At any time, we had seen Perodua ordering 9,000 units per month from us. As such, we do not see a problem for it to achieve its sales target,” said Tee.
MBM Resources Bhd managing director Looi Kok Loon said the industry is expected to recover in the third quarter.

“The second quarter will definitely be affected but we do not see the problem persisting until 3Q. Demand for cars is still going strong. We are expecting things to turn around, especially with the new Perodua model being launched on Thursday (tomorrow),” Looi told The Edge Financial Daily.

Meanwhile, AutoV Corp Bhd chief operating officer Sabidi Abu Bakar said orders for its sun visors had been growing in tandem with the production at Toyota, Honda, and Perodua.
“Orders from these marques have been increasing in tandem with their production capacity. This is good for us even though they only consist of 15% of our total production,” he said.

Unlike other autoparts makers which have been away from the auto sector to reduce cyclical risks, AutoV has been strengthening its position in the sector. This year alone, it acquired two autoparts related companies — Proreka (M)Sdn Bhd and JP Metal Sdn Bhd — to boost its product offerings.

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