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Kia Motors’ partnership with Bermaz Auto (BAuto) will see the formation of a new company, Kia Malaysia Sdn Bhd (KMSB), which will handle the local assembly (CKD) of the brand’s vehicles in Malaysia.
However, it will be some time before CKD operations can begin, according to BAuto CEO Datuk Seri Ben Yeoh. During a question and answer session following a media event to formalize the deal, Yeoh said that it could be 12-18 months before CKD starts operations, with an initial direct investment of approximately $ 20 million (around RM82.8 million) to prepare for production. line.
“I think the joint venture for three models, basically, I think that in order for us to be effective and to be able to export within the regional market, we have to comply with the ASEAN Free Trade Agreement (AFTA). The AFTA stipulates very clearly that there has to be a 40% local cost content and if we have some models, we will not be able to comply with this. Then the localization program will not be effective, ”Yeoh said.
“So, we have to be able to make sure that when we make a unit, it is not only for the national market, since we are looking at the regional market. So, in terms of the localization program, it will be effective because of the economy of scale and then the investment in tools will be justified. Of course, there will be a cost penalty, and that cost penalty is mitigated by the Industrial Adjustment Fund (IAF), which the government has granted us, ”he continued.
“Now that will mean that most of the cost will be absorbed by the domestic market, which will make it viable for the export program. So initially we are looking at three product lines, but that does not mean that we are not showing the full range of Kia products, “he added.
He added that the Kia models will be assembled at the Inokom plant in Kulim, Kedah, which currently has excess capacity and coincidentally BAuto has a 29% equity stake. As confirmed in yesterday’s report, Seltos and Carnival are two of the three CKD models. planned, with a third model to be determined at a later stage.
“I mentioned in the speech that there is excess capacity at Inokom and to fill the excess capacity, manufacturing costs will be reduced. In addition, we are also studying reinvestment in the plant; by the way, we are equity partners in the plant. Therefore, we have an interest in ensuring that plant productivity is maximized. Currently, the Inokom plant has excess capacity, and Kia’s contracting with Inokom is timely to maximize capacity utilization, ”Yeoh explained.
“There are many areas and when the time is right we can reinvest and have our own assembly line. Right now, we are using the assembly line that is vacant, so there is no point in reinvesting and not using the resources that are already available. To remain competitive, we must reduce the cost and this is a way to use available resources, “he added.
Previously, local assembly of Kia models was the responsibility of Naza Automotive Manufacturing, which is located further north in Gurun, Kedah.
Aside from local consumption, there are also plans to export Malaysian-made Kia cars to neighboring ASEAN countries, taking advantage of the ASEAN Free Trade Agreement (AFTA). Kia Motors is committed to ensuring that KMSB becomes its regional vehicle manufacturing hub and has a majority stake of approximately 60% in the joint venture.
During the interim period before the start of CKD production, Dinamikjaya Motors, a subsidiary of BAuto, will continue to sell “hangover inventory” of Kia models from the previous dealer through the 35 existing dealerships in the country. Yeoh was unable to confirm at the time whether new models will be introduced this year in the form of the CBU as it would require the appointment of an authorized importer, noting that the company is currently focused on ensuring that a proper after-sales platform is established.
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