Perodua plans East Coast spare parts hub

KUALA LUMPUR: Malaysia’s largest car maker by sales, Perusahaan Otomobil Kedua Sdn Bhd (Perodua), plans to set up an East Coast regional hub for spare parts, taking advantage of the highly anticipated East Coast Rail Link (ECRL).

Its president and chief executive officer Datuk Seri Zainal Abidin Ahmad said the hub could likely be in Kuantan, Pahang, although other locations in the East Coast are also being considered.

“This will help our customers in the East Coast, not only with a vehicle hub but also a spare parts and pre-owned vehicle hub.

“Hence, there can be quite a big development there. As such, collaborations with the Malaysia Rail Link Sdn Bhd (MRL) and some parties in Pahang can help to create and spur economic development around the area,” he said during the panel session titled “East Coast Rail Link (ECRL): ECRL@Selangor – Economic Benefits & Opportunities” at the National Investment Seminar yesterday.

Earlier this week, Perodua inked a memorandum of understanding with MRL, the project owner of the 665-km ECRL, allowing it to leverage the rail network to transport cars from its plant in Serendah, Selangor to the East Coast, and Sabah and Sarawak.

The ECRL encompasses 20 passenger stations and 10 freight stations. A notable one is the Puncak Alam ECRL station in Selangor as pointed out by MRL head of strategy Mohd Zaidi Sharif.

He said a potential steel products distribution hub as well as the manufacturing of steel finished products may be established there.

“We will bring all the raw steel products from Kemaman and Kuantan to the Puncak Alam ECRL station for distribution to the Klang Valley area,” Mohd Zaidi said.

On this note, Zainal said the proposed steel hub at Puncak Alam could potentially help attract investments in auto-related steel based activities such as tools, moulds and dies which are a subset of stamping and injection moulding processes required by the local automotive industry.

“For the automotive industry, we manage to bring in vendors from Japan, China and South Korea to invest in Malaysia and set up joint ventures with our local vendors.

“However, the one thing that we are unable to do is to attract investments to make automotive-grade steel.

“During discussions with Japanese vendors, they said that while incentives from the Malaysian Investment Development Authority are important, a total logistics supply chain is also crucial.

“Hence, this is another area where some promotions can be done for the automotive industry, to bring investors to Puncak Alam so that they can invest in the steel industry, mainly on tools, moulds and dies for our stamping and injection moulding processes,” he said.

Zainal said “a lot of cost savings” are expected from transporting its cars, parts and components via the railway instead of by road.

Currently, Perodua moves its cars out of Port Klang to customers in Sabah and Sarawak via the Straits of Malacca. He also said the ECRL will help “regional integration” of the East Coast, Sabah and Sarawak with the West Coast.

“We used to transport our completely built-up (CBU) vehicles using trucks and lorries. However, this poses challenges not in regards to efficiency but safety.

“Efficient transportation infrastructure is a key factor in attracting investors. Currently, we do not have vendors in Sabah and Sarawak due to logistical difficulties.

“Most of them are also situated in Shah Alam and Penang.

“As such, with the ECRL, more suppliers will be able to come and invest in Pahang and Terengganu,” he said.

Domestically, Perodua has a 40% market share and it aims to increase this figure to 45% this year. It also plans to grow exports in the next few years.

“We want to increase our exports but we still have about 120,000 outstanding bookings to fulfill domestically. So we have to deliver those bookings first before we can export. Based on our plan, our exports are supposed to be about 10% of our total production requirement.

“Our production now supports 350,000 units, so we are looking at 35,000 units or so for export. We used to export to Sri Lanka but Sri Lanka is not accepting any CBU imports due to their economic circumstances.

“We have shipped our cars to African countries and we are looking at countries like Mozambique. In fact, we do not only export new cars but also used cars to Fiji and some other countries,” he said.

The ECRL railway line from Kota Baru to the Gombak Integrated Terminal is projected to finish construction by December 2026 and become operational starting January 2027.

Similarly, the alignment extending from Gombak to Port Klang is slated to be completed by December 2027, with full operations expected to begin from January 2028 onwards.

Mohd Zaidi said the project is progressing according to plan and is targeted to be completed slightly ahead of schedule.

“Those familiar with the construction industry understand that a project of this scale and size, a 665-km linear project, involves more than 1,400 construction sites, is a mega challenge to keep on track,” he said.