FCAI welcomes Malaysian FTA

The announcement earlier this week that the Australian government had struck a free trade agreement (FTA) with Malaysia should have been grounds for applause from the automotive industry. Malaysia is a right-hand drive country in close proximity to Australia, after all.

But instead the response was muted. The Federal Chamber of Automotive Industries (FCAI) — currently without a chief executive since the recent departure of Ian Chalmers — offered a brief press release congratulating trade minister Craig Emerson and acknowledging that the Department of Foreign Affairs and Trade has worked hard with the Malaysian government to reduce non-tariff barriers as well.

The rest of the automotive industry had little else to offer. Holden, the company with an actual history of exporting cars to Malaysia, is keeping its cards close to the chest.

"We're always looking at export opportunities, but right now our focus is primarily on the domestic market," Holden's Corporate Communications Manager, Shayna Welsh, told motoring.com.au. "We consider all opportunities, but we don't have anything to announce right now."

When Holden began exporting CBU (Completely Built Up) cars into South-East Asia in 1956, our close neighbour was still known as Malaya. Holden was still sending cars to Malaysia as recently as 2005 — the VZ Commodore — but since then the GM brand has been more focused on larger-scale opportunities in the Middle East and the US.

While the Commodore would be a niche player in the Malaysian market, if it were ever to sell there, the Cruze could make more sense. With the FTA reducing the landed cost of the Cruze in Malaysia, it's remotely possible that the small car could be cheaper for Malaysian wholesalers sourced from Australia than from South Korea. But Ms Welsh said: "We don't have any export plans for Cruze at this point."

An industry insider informed motoring.com.au that the non-tariff barriers to trade in Malaysia remain a serious road block for any manufacturer aiming to export a car there. If anything, the FTA would lower the landed cost of a car imported from Malaysia. There's just one company in Australia bringing in Malaysian-built cars: Proton.

Proton's case is interesting. The company's cars sell in small numbers and the brand recently moved downmarket to pick up more sales volume. For the year to date the importer has sold 379 units, more than a hundred less than the same period for the year before. While most models are selling at around the same level as the previous year, the cheapest car in the range — the S16 — has seen sales reduced to less than half what they were... 182 cars sold last year and just 88 so far this year.

The conventional approach to passing on the savings to buyers from reduced landing cost has been a question of raising the standard equipment level, rather than reducing the retail price. That way the buyer doesn't get stung with a slashed resale value when it comes time to trade in the old car for a new one. In practice, more and more car companies are reducing prices, as the Australian dollar has traded higher since the GFC, and the import tariff for passenger cars has been reduced to five per cent.

Proton may need to follow suit, not because it can't upgrade the standard specifications of its models, but because grabbing market share and establishing the brand as a real competitor in the local market is relatively more important to the company, in the face of the threat from China.

It seems coincidental indeed that the FTA has been fast-tracked in the months since the Malaysian government announced it would offload Proton, but it's timely for Proton Australia, with new models the Exora people-mover and Preve small car on the way. The importer was asked to comment on this story, but provided no response.

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