Toyota sees slump coming

Toyota’s partner in Malaysia, UMW, is expecting a challenging year ahead in the region due to ever increasing competition. In a post Annual General Meeting media briefing, UMW Holdings Chairman, Asmat Kamaludin, said that the company is expecting a sharp drop in vehicle sales from the 103,000 units last year to approximately 90,000 this year.

Asmat (second from left) during the launch of the new Camry in April.

According to the management at UMW, the drop is due to two key factors: severe competition from new entrants to the market and existing rivals being able to push newer models from new assembly plants within Malaysia.

“The challenges are coming mostly from Nissan, Honda and Mitsubishi not just in Malaysia but also in Indonesia and Thailand,” said Asmat.

Throughout Asia, there has been a headlong race to build production plants, resulting in far too much production capacity. Recently in China, where the double digit growth in new car sales has slowed, a price war is taking place with many of the international brands slashing prices by as much as 40% on some models. In the ASEAN region, the likes of Ford and VW have been offering major incentives to win market share, such as low/no deposit financing with zero percent interest rates.

The announcement may have taken a few by surprise, especially as UMW Toyota had achieved an increase from 14.6% to 15.6% market share between 2013 and 2014, with a total vehicle delivery of 103,635 units. However, international news has been full of reports on the ever increasing competition between car makers and the impact that Chinese brands are now starting to have in every market, particularly South East Asia. For UMW this is coming pretty close to home as a very plausible ‘clone’ of the popular Toyota Hi-Ace minibus - a popular school bus and tour group vehicle in Malaysia - is being sold via UMW’s competitor, Berjaya; that is the ERA Jinbei (below) by Brilliance Auto based in Shenyang, China.

“The automotive business, which is our core business, is becoming competitive due to the number of new entrants into the market with new models,” said Asmat.

“We have been in discussion with our partner at Toyota and I think they recognise that we have problems also in places like Indonesia and Thailand. We need new models that can compete with the likes of what Honda is introducing but this will take time,” he added.

Asmat then concluded with what must be music to Honda Executives’ ears when he said, “They have the new HR-V which looks very exciting and they have the new Jazz model which we do not have. They also have greater flexibility because they have the new assembly plant at Malacca (Malaysia).”

UMW assembly plants within Malaysia are becoming a little outdated, according to Asmat, and whilst they need upgrading, the management is also quick to add that these are still effective facilities. However, with a capacity of just 76,000 units per year, the existing production facilities cannot produce enough vehicles for the local market, leaving UMW to rely on more expensive imports to bridge the production gap.