Sluggish car sales hit component makers in Malaysia

Car component makers are bracing themselves for tough times ahead with reports of a glut of 250,000 cars in the market.

An industry source revealed that about three-quarters of the 300-odd companies could cease operations if the situation does not improve by year's end.

“Most of these companies are highly dependent on Proton.

“The big component manufacturers are all right, but the small ones (low-end plastic component makers) which are mostly bumiputra-owned are in deep trouble with loans to pay and no business,” the source said.

On Saturday, Edaran Automobile Nasional Dealers Association of Malaysia said there were 800,000 cars for sale in the market, 250,000 more than usual, making it difficult for national car dealers to remain in business.

A source, who works for a component company, said several factors were causing a slow-down in production of cars especially in Proton.

“Financing costs have gone up, everything is up except for income.

“Malaysian buyers have also matured and this has affected the sales of Proton.”

It is learnt that Proton is only producing around 10,000 units per month compared to 15,000 to 16,000 units previously.

It is learnt that at a recent meeting, Proton told component manufacturers not to alert the media of the problems facing the industry.

“But there is no way we can keep it a secret. Eventually, the public listed companies must explain to the Securities Commission why there is no more profit,” the source said.

“Everyone is scaling down production and the only company maintaining theirs is Perodua with sales of the Myvi models doing well.”

Another source disclosed that a company producing spoilers and bumpers which used to operate two shifts a day had to cut its operations to one shift since June.

The source said if the situation persisted, its workers might be laid off.

Meanwhile, used car dealers are confident the glut will lead to car manufacturers offering incentives to customers to buy new cars.

Kuala Lumpur and Selangor Car Dealers and Credit Companies Association vice-president Dave Lim said this would allow the manufacturers to clear their stock.

“More importantly, the used car dealers are now ready to get new used cars to sell,” he said, noting that if new cars were not sold, the used car market would suffer.

“We have already made all the necessary adjustments in the past few months since the National Automotive Policy (NAP) was implemented.

“We have stopped accepting trade-ins and have since cleared our stocks.

“The only difference now is that we will be buying cheap and selling cheap as well.”