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Malaysia Automotive Industry Report: Japanese Cars Encounter Strong Rivals, Will They Survive?

Malaysia is huge and highly populated, other than the capital city Kuala Lumpur, which has a better public transportation system, people in most areas tend to use cars to commute. According to statistics from the World Bank, Malaysia has 373 cars per thousand people, which is only behind South Korea, thus has attracted many car manufactures. However, Malaysian domestic car brands rely on price advantages to sit firmly in the first and second place, while imported cars led by German brands. How should Japanese brands compete?

Hatchback and sedan tend to be Malaysian’s first choice

Seeing local preference upon car types, Malaysians tend to love hatchback and sedan. Due to a high number of vehicles in Malaysia and limited parking space in urban areas, hatchbacks are smaller in terms of body, making it more convenient for car owners to park. Sedan usually appears in suburbs and residential areas, while city cars are popular among middle-class families. Although the word of mouth volume of SUVs is not as high as hatchback and sedan, their comfort and ability to carry more passenger are popular among high-income groups.

Japanese brands encounter strong rivals from two other countries

The top 10 Malaysian car brands are occupied by two local, four German and four Japanese car dealers. Japanese car brands have a certain market share in Malaysian market, but in terms of word of mouth volume, individual brands lose to domestic car brands, while the overall volume is slightly less to German car brands. As Malaysians need cars to commute, young people who have just entered the real adult world or lower-middle-class families are more sensitive to price. Domestic cars that sell half-price of foreign brands have become the first choice for most people. Proton's Saga (sedan) and Perodua's MYVI (hatchback) have been popular all year round because of their low prices.

On the contrary, German car brands are quite popular among upper-middle-class group, among which BMW has the highest volume. Based on Malaysian government’s doubling tariffs on imported cars, German cars priced three to four times the price of domestic cars and focused on high-end sports SUVs. Their solid bodies, powerful engines and high brand awareness are more appreciated by the wealthy. Japanese car brands are positioned between domestic cars and German cars and are mostly bought by middle-class people. Due to the large gap between the rich and the poor in Malaysia, people of lower socioeconomic status prefer domestic car, and the wealthier prefer German car, so the volume of Japanese cars is slightly inferior.

Due to its low price and plenty of functions, Perodua MYVI is highly favoured by locals

There are many car models sold in Malaysia. In terms of word of mouth volume, Perodua MYVI leads the market, followed by Proton's X70, Saga and Persona. Japanese cars, which have always been strong in the international car market, not performing well in Malaysia, seeing the volume is far less than domestic brands Proton and Perodua. However, the MYVI hatchback is popular among locals because of its combination of low-price, short body size (easy to park), low fuel consumption, low maintenance costs and spacious cabins, making it to be Malaysia’s national car representative.

The features of two Proton sedans are similar to Honda, Toyota and Mazda, but the prices are only half to two-thirds of Japanese car brands. Take the 1500cc cars of Proton Persona and Toyota Vios as an example. Due to auto tariff, the price of Vios in Malaysia can reach NT $526,000, while the price of Persona is only NT$308,000. In addition, because the parts and accessories of domestic cars are produced locally, the maintenance cost is obviously lower than Japanese cars, which is a more suitable choice for the first car buyers.

Price and car maintenance are winning keys, engine and transmission are also crucial

If Japanese cars want to compete with Malaysian and German brands, they need to grasp Malaysian consumer preferences through i-Buzz popular keywords. It is shown that price and maintenance cost are two important matters for Malaysians, and both local brands Proton and Perodua have seen and grasp these opportunities. Their prices are nearly half cheaper than foreign brands, and they provide cheap and good repair and maintenance services. Therefore, in terms of positive reviews, domestic cars often get more voices of "cheap price".

In terms of auto parts, Malaysians put more focus on the engine and transmission. "Car modification" is popular among young Malaysians, which means that low-cost domestic cars are modified in the style of imported cars. If you want to create a sports car feel for domestic cars, you need to replace the engine. In response to this, Proton focused on the needs of consumers by introducing the technology of British sports car brand, Lotus to transform the initial engine, which has attracted young car owners to buy affordable but powerful cars. Malaysians also prefer manual transmissions. First, the middle-aged consumers are used to manual transmission in the early years, and secondly, the high-end consumers think that manual transmission are more powerful and easy to convert into sports cars.

Japanese cars are favoured in appearance and interior design but need to pay attention to noise, speed and engine power performance

Seeing from the positive and negative reviews of automotive brands, price is the most-discussed aspect among internet users. Besides BMW who slightly garnered more negative review in “expensive”, the other four brands are similar in price performance. As a German car, BMW is outstanding in speed, engine power and comfort. This is in line with the high price of German cars and the "Made in Germany" impression.

On the other hand, the domestic car brand, Proton is outstanding in terms of advanced technology. This is due to continuous improvement with the assist of foreign technology and independent innovation, making customers not only attracted to its low price but also shows their trust in the quality of domestic cars. Although Perodua has an advantage in price and body, its exterior design has been criticized by consumers and needs to be improved.

The Japanese cars Toyota and Honda have been affirmed in terms of price and appearance, but have received many negative comments in terms of speed, engine power and noise. Honda's flaws are due to noise problems which is lack of soundproof function. The disadvantage of Toyota is due to its weak engine power and slow speed, mainly because they focus more in fuel-efficiency, smooth and steady engine, which cannot be as powerful as German car.

Japanese cars can improve their price positioning and engine power

Through i-Buzz Asia “Malaysia Automotive Industry Report” could be seen that each consumer groups have different preferences. People who just entered the workforce and lower-middle-class groups tend to buy low-priced domestic cars to avoid unnecessary taxes and high maintenance fees. Even if the engine power needs to be strengthened, local consumers are willing to modify and personalize the engine to build their own sports car, while the affluent class can afford high-priced, well-made, and powerful German cars.

Japanese cars currently focus on the middle-class market, and their prices are between domestic and German brands. To expand their market share, Japanese brands should extend to both sectors: low-income and high-income group. In terms of price, local governments should be lobbied to reduce tariffs, provide tax reductions, and establish local auto parts manufacturers to save costs in order to compete with domestic cars. In terms of engine power, high-end car models should be promoted to the wealthy, and the focus should be on the research and development of car engine and body, so that they can compete with German cars. If they can utilize market segmentation strategies, Japanese cars will be able to succeed in the highly competitive Malaysian market.