Share this story
Close X
Switch to Desktop Site

Malaysia's own auto gets boost from US

Amid sagging domestic sales and rising debts, Malaysia's ``national car'' has gained a possible lifeline to the American market. An initial sales target of 100,000 cars a year, in fact, is four times the current production level of the Proton Saga - part of the Malaysian government's controversial program to move the country from an agricultural to a heavy-industrial economic base.

The launch of the Saga coincided with general economic recession in Malaysia, which this year has led to new-car demand shrinking by a quarter. There has been no export market to take up the slack for the 16-month-old car. The biggest overseas sales have been 25 cars to Bangladesh and 11 to Brunei.

About these ads

But earlier this month Proton announced it had signed an export deal with Bricklin Industries, a New York-based investment company, and sales were scheduled to begin in February 1988. Malcolm Bricklin, chairman of the company, told a press conference in Kuala Lumpur recently that he hoped to sell up to 100,000 Sagas in the first year, rising to 250,000 units by the fifth year.

Mr. Bricklin expects to spend $10 million on modifications to meet American safety and emission control standards as well as establishing a network of dealers. The company has previously introduced the Yugoslav Yugo car and the Japanese Subaru sub-compact to the United States market.

The Proton Saga is based on the Mitsubishi Lancer Fiore, with the Japanese providing the engine, transmission, and chassis. Malaysian content includes tires, battery, cushions, and some minor trimmings. Although critics insist the Saga is really a thinly disguised Japanese car, Prime Minister Mahathir Mohamad sees the project as a means of developing a host of ancillary industries, such as steel, plastics, and electronics.

It was reckoned from the start that Saga sales would have to reach 100,000 a year if the project was to repay its start-up costs and turn a profit. The company's 1986 projections originally called for the sale of 42,000 units, but this had to be revised downward to 30,000 out of expected total national demand of only 50,000 cars. Next year, total new car demand is expected to decline to only 35,000 vehicles.

Sales slumped significantly after Saga's sole domestic distributor, Edaran Otomobil Nasional (EON), raised prices in July to cope with the yen's appreciation.

``We must be realistic and accept the fact that we are facing a difficult market where demand for passenger cars has fallen drastically and competition remains keen,'' noted EON's chief general manager, Sarcharan Singh.

It is against this background that the proposed entry to the US is being hailed as a lifeline for the industry.

About these ads

``If the Saga makes it in the US market it will be a windfall for local component manufacturers,'' predicts Abdul Rahman Ibrahim, deputy chairman of the Malay Chamber of Commerce in Kuala Lumpur. ``Taking into account the difficult American market, a successful entry means the national car could make inroads into other markets such as Europe.''

Mr. Ibrahim says it could also galvanize support from Malaysia's allies in the Association of Southeast Asian Nations (ASEAN) to make the Saga the region's domestic car. Malaysia is studying a proposal to convert the project into an ASEAN joint venture, with contributions from the Philippines, Indonesia, and Thailand, all of which have their own auto assembly industries.

But the Saga still has to succeed in America, and analysts wonder whether it can establish a strong separate identity and survive against competition from highly efficient Japanese and Korean carmakers.

Price may be the key, some units will sell for as low as $5,000, while the top price will be around $8,000, where it will face tough competition from Japan's Toyota and Nissan and South Korea's Hyundai. But at those prices, can Malaysia hope to make a profit?

Following last July's 15 percent price increase, Saga models in the Malaysian domestic market sell for between $8,400 and $10,000. Many industry insiders reckon these price levels are possible only because the Malaysian government is heavily subsidizing the project.

The agreement with Bricklin calls for the US company to join hands with Japan's giant trading firm Mitsui in seeking out international car component manufacturers willing to go to Malaysia and set up joint ventures with local concerns. This, it is reckoned, will help reduce manufacturing costs and make the Saga a more viable export commodity.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.