Economists consider Mahathir’s 3rd national car not viable

(FMT) – Two economists have warned of massive challenges to be faced by the company that will produce a new national car, saying success is uncertain.

Firdaos Rosli of the Institute of Strategic and International Studies said the success of an automotive manufacturing company would hinge on quality and cost controls as well as the management of vendors.

Yeah Kim Leng of Sunway University Business School noted that DreamEDGE, the company that will build the car, had no track record. He said it was “taking an enormous risk” entering a highly competitive arena.

Firdaos and Yeah were commenting on yesterday’s announcement that DreamEDGE would develop the third national car in collaboration with Japan’s Daihatsu Motors, with the first model expected to be launched in 2021. The company is targeting mass production by 2031.

DreamEDGE would have to offer superior technology to have any impact on the local market, says Yeah Kim Leng.

“There’s not much that we know about the company’s experience and track record in manufacturing,” Firdaos told FMT.

He acknowledged that the collaboration with Daihatsu could result in cost savings but he said the venture would need economies of scale to be viable and DreamEDGE would have to export its cars because the domestic market was too small.

He said even Perodua, the country’s most successful car company, would have to eventually export its cars. “Its current sales growth is not as fast as Japanese brands.”

He said this meant Malaysia would have to sign more free trade agreements or deepen existing agreements.

Firdaos referred to DreamEDGE’s plan to mass produce by 2031 as a big challenge, saying people were moving away from car ownership towards ride sharing.

Economist Firdaos Rosli says there’s not much that we know about DreamEdge’s experience and track record in manufacturing.

“This is a global trend that is catching on here,” he said.

“At home, we must also remember that the MRT and LRT3 projects have yet to be fully completed. Once this happens, you’ll see greater use of public transport.

“So if exporting is not included in DreamEDGE’s plans, it has a recipe for disaster.”

Yeah said DreamEDGE would have to offer superior technology to have any impact on the local market.

“The established players have big research and development capabilities, huge capitals and economies of scale,” he added.

Yeah said he believed it would be better for local companies to develop components and complementary technologies than to manufacture cars.