December is a quiet month for the auto industry, for obvious reasons, so we didn’t see this coming. Instead of holidaying, the management of Perodua and Daihatsu held a media briefing this morning, revealing huge plans for the Rawang-based carmaker. Perodua will invest RM790 million to set up a new company and a new manufacturing plant adjacent to its existing factory in Sungai Choh, north of Rawang.
The new 65,000 square metre facility and its holding company (same shareholder ratio as now) will create 1,200 new jobs and add 100,000 units to Perodua’s annual production capacity, which now stands at 200k with a two-shift cycle. The 100k figure is based on a single shift, so full capacity should be even higher. Mass production is scheduled to start in mid-2014.
Perodua managing director Datuk Aminar Rashid Salleh said that the new plant will be “world class” and have the same hardware, systems and processes as Daihatsu’s factory in Japan. While the “new plant and old plant will complement each other,” the reason Perodua is building a new plant is because it’s easier to build a top level plant from scratch than upgrading a 19-year old one to meet the best standards.
“We want to jump start immediately, start from day one on a global level,” Aminar said. “This new company will be a role model for our existing manufacturing plant. It will have improved systems, new tech, more automation and is environmentally friendly,” he added.
The new plant will feature, among other things, increased automated welding (full automation for under and main body), automatic body accuracy measurement, the latest 3-Wet Waterborne Paint, enhanced dustproofing for the paint shop and a brighter/quieter working environment.
Besides adding more capacity, the new plant is part of a structural transformation process Perodua is undergoing to better face market liberalisation post-2016. The new culture and practices from the new company/plant and will be implemented on the current plant via a process Daihatsu calls Yokoten.
We’re some years away from 2016, but Perodua admits that it is already feeling the heat – recent arrivals like the Mitsubishi Mirage and Nissan Almera (the latter sparking a price war of sorts) are encroaching into a price territory previously exclusive to national makes. Price aside, the new entries tout fuel efficiency as a selling point, and FC is one of the main reasons why Perodua is where it is today.
Faced with this, Perodua wants to reduce costs and improve quality to stay in the game. “We have to do something about it, and we have to do it quickly – it’s do or die for us. We cannot afford to be juara kampung,” Aminar declared. For readers outside of Malaysia, juara kampung can be translated to “village champion.” Think of a big fish in a small pond.
“This new plant is part of our five-year strategic roadmap to stay competitive in the ever liberalising automotive industry by helping us be more productive and efficient, while at the same time reducing cost,” he added.
An extra 100,000 units per year sounds like a big jump, and it is – with exports expected to account for only 20,000 units of total volume by 2015, some on the floor were scratching heads, wondering where all those extra cars will go.
Aminar replied that Perodua is only trying to protect is market leading share of 28% to 30%, and the big volume corresponds with projected total industry volume (TIV), which is expected to grow from the current figure of around 600,000.
CEO of Malaysia Automotive Institute (MAI) Mohamad Madani Sahari was at the event, and he told us that projected TIV for Malaysia is 750,000 units for 2015. You do the math.
With this announcement, Perodua is definitely ending the year with a bang. Some might have expected Daihatsu, which is big in Indonesia, to focus on our fast-growing neighbour as its base for ASEAN growth, but DMC has described Malaysia as a “key base for its overseas business.”