In the automotive industry, keeping manufacturing costs as low as possible is paramount, as the higher the cost, the less competitive one becomes. How a market thrives – or doesn’t – is largely determined by its ability to secure or produce elements in the supply chain, be it in the form of components or materials needed for production, in cost-effective terms.
In this regard, Malaysia is lagging behind, and that’s an important factor curbing its growth. That’s the opinion expressed by Geely chairman Li Shufu, who said the competitiveness of Malaysia’s automotive industry is being restricted by its automotive supply chain costs, which is about 30% higher than China’s and more than 10% higher than Thailand’s.
In an interview on state-owned CCTV programme “Dialogue,” which was picked up by Chinese tech website CNMO, Li said that the fundamental reason for the high cost of Malaysia’s automotive supply chain lies in the lack of competitiveness of local parts.
He said that Malaysia’s automotive parts supply still relies heavily on overseas imports, and that the relatively small size of the local automotive market meant it was difficult to get enough scale to keep costs down.
Having realised the seriousness of the matter, Li said that that one of Geely’s current priorities is to help improve the competitiveness of the country’s automotive industry’s supply chain. He stressed that Geely will promote the localisation of Malaysia’s auto parts industry by introducing advanced global auto parts companies into the market and strengthening cooperation with local suppliers.
Undoubtedly, a large part of the investment exercise will centre around the development of the Automotive Hi-Tech Valley (AHTV) project. The Chinese automaker said last year it had big plans to increase its investments in Malaysia to the tune of RM32 billion, while making the country its production hub for export markets.
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