Mahathir's New Car Brand to Be Asean Effort to Weather Trade War

(Bloomberg) -- Malaysia’s third push to build a national car brand may see it sourcing parts from Southeast Asian neighbors, as the region forges stronger ties to weather out the U.S.-China trade tensions.

Prime Minister Mahathir Mohamad’s dream of developing a homegrown automotive brand has courted interest from neighboring countries, Minister of International Trade and Industry Darell Leiking said in an interview with Bloomberg Television’s Sophie Kamaruddin in Kuala Lumpur.

Mahathir's New Car Brand to Be Asean Effort to Weather Trade War

“What Mahathir meant was that he needed something where Malaysians can get together, Asean can get together, to supply components of this vehicle and make it into a national car in Asean, not only in Malaysia,” said Leiking. “It’s ambitious but I think that it’s necessary now, more so when you want to create an economic bloc like Asean.”

As a trade war between the U.S. and China deepens, the 10-country Association of Southeast Asian Nations, or Asean, has benefited from its fallout as companies shift orders and move production bases to the region. It was the top destination among the one-third of more than 430 American companies in China that considered moving operations elsewhere, according to a survey by AmCham China and AmCham Shanghai.

Toyota Motor Corp., Tata Motors Ltd. and Ford Motor Co. already operate assembly plants in Thailand, the biggest car manufacturer in Southeast Asia. The country seeks to ramp up production to 3.5 million units in 2020, an 80 percent increase from 2016, and exports the vehicles to Australia, Japan, as well as Malaysia and Indonesia.

Malaysia stands to gain as a trans-shipment point, capitalizing on its location by the Straits of Malacca -- a historic channel connecting Asia’s biggest economies from Japan and China to India and beyond. Finance Minister Lim Guan Eng said the trade war will be positive for the country over the next year or so, especially in electronics and steel as the world’s two biggest economies seek alternatives for supplies.

Privately Driven

The government is gathering views from the industry on developing the new car brand, and will let the project be driven and funded by the private sector, Leiking said. The government will assist in licensing and facilitation, he said.

Mahathir revived his vision of a homegrown car brand just a month into his premiership. He started automaker Proton Holdings Bhd. in the 1980s during his previous tenure, but the brand was later privatized and almost half the stake sold to China’s Zhejiang Geely Holding Group Co. A second effort was made in the 1990s with Perusahaan Otomobil Kedua Sendirian Bhd., also known as Perodua.

This time, however, the new car will compete in a market beyond Malaysia, Leiking said.

“Proton has already achieved what they’ve wanted and they’re there,” he said. “So this is not competing with Proton, this is not competing even with Perodua, this is not competing with anyone. This is a separate thing altogether.”

Advise and Pray

A successful carmaker could help boost the nation’s exports, which relies on commodities such as crude and palm oil, as well as electronics. Shipments declined 0.3 percent in August from a year ago, falling far short of economist estimates for an 8 percent increase. That narrowed the trade surplus to 1.6 billion ringgit ($385 million), from 8.3 billion ringgit in July.

Malaysia had taken into account the possible knock-on effects that global trade tensions may have on the supply chain. The government has engaged with representatives from the U.S. on the matter and was banking on the world’s two largest economies remaining rational.

“Eventually America and the Chinese will come to an understanding, and I pray that they do,” Leiking said. “What else can we do other than advise them and pray? I have faith that they will come to their senses.”

©2018 Bloomberg L.P.