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The primary reason why this paper has been initiated was to examine the impact of the 2008 financial crisis on the automotive industry in Malaysia and to understand how some car manufacturers have been able to sustain profitability or at least limit losses in these trying times. The paper will try to single out car manufacturers in Malaysia which have been the least affected by the financial crisis and also to identify what the strategies are in trying to address the challenges brought about by the crisis. The paper will also try to identify the factors which have influenced the performance of these companies and their abilities to sustain profitability during these tough times. LITERATURE REVIEW Significance of the Automotive Industry to the Economy The automotive industry can be considered to be the single largest manufacturing sector in the world. At least 10% of the Japanese and American Gross Domestic Product and employment are generated from this industry. By 1988 the European Union‟s 12 member states produced a total output value of 80 billion Euros and employed a total of 1 million workers. The largest producing nations are the United States of America, Germany, France, Italy, Spain and the United Kingdom. Rosli (2004) wrote: “Efforts to develop the automobile industry would have significant impact on resource-based industries, such as iron and steel, chemical, nonferrous metal, rubber and plastic-related industries as well as petroleum based industries; and on non-resource-based industries, namely electrical and electronics-related parts. In the tertiary sector, it provides service-related activities, such as stamping, repairing, designing and engineering, banking, shipping, storing, insurance and distributing and marketing channels. Of significance, the automobile industry requires a set of production systems linking a wide range of industrial organizations and technologies with great variations in size and sophistication. Over the span of 23 years, (1980 – 2003), it was only during six years, that the proportion of the passenger vehicles to the total vehicle production was less than 70%; the rest were either over 70% and sometimes even exceeding 80%. On average about 76% of the TIV were passenger cars and the rest commercial vehicles. This is in contrast with Thailand, Indonesia and the Philippines where the production is dominated mainly by commercial vehicles over passenger vehicles.” Factors affecting the Performance of the Automotive Industry There are several factors that can significantly affect the performance of the automotive industry in a given market. Since the purchase of a vehicle can be considered a big ticket item and therefore account for a significant portion of the household income, the purchase of a vehicle is a very serious consideration for most people. In Malaysia, car loan tenures have grown considerably longer. Loan tenures of up to nine years are very normal in most cases and in some special cases such as the Government Servant Scheme, tenure of 10 years is also available for selected models. However, this is just the tip of the iceberg. The more important consideration is the approval of the loan when an individual applies for one to buy a car. This is probably the biggest lever in determining the success or failure of the automotive market in any given country. Armin Baniaz, acting head of Proton Edar Dealers Association (PEDA) was quoted as saying “... banking facilities and hire-purchase loans are the main factors that will determine the sustainability of the automotive industry. On top of that, over 90% of car dealers and vendors operate with banking facilities while over 90% of customers buy using hire purchase loans. UNITAR E-JOURNAL Vol. 6, No. 2, June 2010 81
Currently, the approval rate for car loan applications in Malaysia is at 40% but it could go even lower this year”. This means that only 40% of customers who book a car at a Proton dealership will get a loan approval. In other words, the loan rejection is a staggering 60%. It is not really a matter of getting buyers for the cars, it is about getting buyers who qualify to get a loan to buy the car in the first place that matters. The other main factor affecting the automotive industry is the availability of the scrapping policy. The following section will dwell into this area and uncover some of the truths and myths of the scrapping policy. There are several countries which have already successfully implemented the policy and there are some others which are still coming to grips with the idea. In the recently announced second stimulus package by the Malaysian government, a scrapping policy was introduced. During the announcement of the “Second Stimulus Package” on 10 March 2009, Datuk Seri Najib Tun Razak, at the time Malaysia‟s Deputy Prime Minister, who also holds the portfolio of Malaysia‟s Finance Minister, disclosed that the automotive sector also got a shot in the arm, with a rebate of RM5,000 given to owners who trade in their cars of at least 10 years old for the purchase of a new Proton or Perodua vehicle. It is still unclear how this will affect the market as it is only applicable to Proton and Perodua cars. When the International Trade and Industry Minister, Tan Sri Muhyiddin Yassin was asked to elaborate on the package, he disclosed that “…the government will finance part of the discount borne by Proton and Perodua. This incentive will, to a certain extent, give the opportunity to defend the number of cars sold this year. …there were more than one million cars aged 15 years and above while 10-year-old cars were less but the number is still big… With this offer, I hope 100,000 cars can be sold and this is a big number. "I believe though the government has to forgo RM5,000 income for a car, the returns to the industry and economic activities are even better,". Getting the right car to the right market requires some degree of market intelligence. Ishak, N. K., Mutum D., Ghazali, E. and Fan C. K. (2006) suggested that the current era of relationship marketing, is to ensure business success through an in-depth understanding of the customer‟s needs and wants. This should cover current as well as potential customers alike. This is because when customers are highly satisfied, they are more likely to be loyal. Giving customers what they want is a key strategy to improve profits. To do this, car manufacturers have opted to build cars using the „modular assembly concept‟. Using common platforms, interchangeable front end and back end architectures and sub assembly modules, cars can now be built more efficiently, and with added flexibility to customize specific requests(C. Benko and W. McFarlen, 2003) Although CRM is relatively new in Malaysia, it has been found to be useful to automotive distributors and dealers to identify and reach target customers, reach specific customer segments and to identify various customer needs. This is where Toyota has mastered the art. With its vast array of models, each specific country can build a market and sell the products that best suit their needs. Strategies of the Big Five Car Manufacturers Upon close examination of the recent data, it was found that almost every model of vehicle analyzed had a decline in sales for 2008 from the same month in the previous year. The only models which did not have a decrease in sales for the period was the Honda Jazz, Proton Saga, the Honda Accord and the Toyota Vios. A tabulation of registered sales by OEM indicates clearly that the top 5 manufacturers are Perodua, Proton, Toyota, Honda and Nissan. It is only fair to take a closer look at the least affected automotive OEMs, namely Toyota, Honda, Proton, Perodua and Nissan. The strategies of each company will be discussed in the following sections. UNITAR E-JOURNAL Vol. 6, No. 2, June 2010 82
Page 1 and 2: THE 2008 FINANCIAL CRISIS AND THE S
Page 3: The stimulus package as a whole is
Page 7 and 8: large as Toyota, which has a volume
Page 9 and 10: Strategies Employed by Nissan Up un
Page 11 and 12: In this regard, it can be noted tha
Page 13 and 14: would have to bring in the car to t
Page 15 and 16: REFERENCES Bernama News Agency. (Ma
Page 17 and 18: 2007 Model Jan Feb Mar Apr May Jun
Page 19 and 20: This data shows the sales of B-segm
Page 21 and 22: Table 12 Registered Sales of Cars i
Page 23 and 24: Table 16 Registered Sales by OEM fo

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