Business / Auto Global

Feasibility of ASEAN joint auto venture

( Updated: 2014-11-14 09:52

BEIJING - It's been dubbed the "ASEAN car" -- the idea that the Southeast Asian countries could collaborate on the production of a vehicle for their region, and for wider export.

At the inauguration of new Indonesian President Joko Widodo, Joko and Malaysian Prime Minister Najib Razak agreed to study the concept. But analysts warn that it will be tough to pull off such a venture and that Malaysia's own efforts at creating an indigenous car may prove a cautionary tale.

Thailand's auto industry is the undisputed leader in Southeast Asia, though with its large population. Indonesia is seeing a lot of growth.

Big foreign automakers have set up assembly plants in those countries, and Malaysia. But only Malaysia has a homegrown automaker -- Proton.

So, it was a surprise to many when Joko suggested that his country and Malaysia could collaborate to produce an ASEAN car.

"To my mind, the global automakers already have products in the ASEAN automotive space. I find it hard to imagine that they would find some viability in order to participate in this project," RHB Bank's auto analyst Alexander Chia said.

Three decades on, Malaysia's own efforts to create a national car haven't been a huge success. Proton no longer even dominates its local market, and its exports have been negligible.

For much of its history, Proton has been plagued by quality and reliability issues. And thanks to high tariffs and taxes aimed at protecting Proton, Malaysians have ended up paying more, not less, to drive.

But the creation of Proton, and an influx of foreign auto makers into the region, has seen the growth of local component manufacturers, something ASEAN can leverage.

"We're not talking about a domestic car here for this project to be feasible," president of Malaysian Automotive Association Aishah Ahmad said. "What I'm saying is that any car manufacturer will be able to decide on making an ASEAN car where the sourcing of components comes from ASEAN so there could be economies of scale. You don't need to have a national car project for the ASEAN car concept."

Higher ASEAN content could also mean lower tariffs and prices, something all car buyers would welcome -- whether the vehicles carry an ASEAN badge or not.

Feasibility of ASEAN joint auto venture Feasibility of ASEAN joint auto venture
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