Malaysia urges consolidation in auto industry

Malaysia's two main local car makers are looking at ways to co-operate and cut costs but there is no talk yet of any merger, one of them said on Monday. Proton and Perodua are Malaysia's two main domestic manufacturers, claiming over 70 percent of a market where demand is estimated at around 500,000 cars this year. Two other companies also assemble cars locally.
"Our CEO meets regularly with Proton to see where we can work together but we have not reached the stage where we are talking about mergers," Asmat Kamaludin, chairman of Perodua, the country's second-largest car maker, told Reuters.
Asmat was speaking on the sidelines of an auto conference in Kuala Lumpur after Malaysia's deputy premier told delegates that consolidation among the industry's lower ranks might be needed.
"While the government continues to encourage small and medium-scale players, there may also be a need to consider steps to consolidate among the many vendors (suppliers) in the automotive industry in order to gain scale, financial strength and managerial talent to expand internationally," Najib Razak told the conference.
But talk of mergers among local car makers themselves has yet to gain traction, despite complaints within the industry that Malaysia's market is too small to sustain more than one or two domestic car makers, given increasing competition from imports.
State-controlled Proton and Perodua, partly owned by Japan's Daihatsu Motor Co Ltd, should share resources to cut costs and even look at some form of cross-ownership, argued one industry paper to be delivered to the conference.
It suggested the two firms should follow the example of Ford, the second-largest US car maker, which owns a third of Japan's Mazda.
But Perodua's Asmat suggested that existing alliances created a hurdle to any merger, pointing out that while Daihatsu and Mitsui owned 28.42 percent of Perodua, Proton had recently forged an alliance with Germany's Volkswagen.
He said merger talk had not arisen "mainly because in Perodua we have a foreign partner in Daihatsu", the mini-vehicle unit of Toyota Motor Corp, though Perodua and Proton were already co-operating in some ways.