BRIEFING TO UK TRADE MISSION 26 MARCH 2014 KUALA LUMPUR

BRIEFING TO UK TRADE MISSION 26 MARCH 2014 KUALA LUMPUR 1

CONTENTS 1. Profile of MAA 2. Overview of the Malaysian automotive industry 3. Market situation: Production & Sales Malaysia and ASEAN 4. Automotive Policy & its evolution National Automotive Policy 2014 5. Malaysia: tariff of motor vehicles 6. Free Trade Agreements signed 7. Safety & Environmental issues

CONTENTS 1. Profile of MAA

BACKGROUND: PROFILE OF MAA Established in November 1960 as Federation of Malayan Motor Traders (FMMT). Malaysian Automotive Association (MAA) formed in January 2000 following the merger of Malaysian Motor Traders Association and Malaysian Motor Vehicle Assemblers Association.

PROFILE OF MAA (CONT.) MISSION STATEMENT: To be the leading and professional organisation for all stakeholders on matters relating to the Malaysian automotive industry. OBJECTIVES: i. Encourage, promote and protect the interests of the automotive industry of Malaysia. ii. iii. iv. Be wary of proposed legislation or other measures affecting the automotive industry. Disseminate information to Members Promote consultation and co-operation among members.

ORGANISATION STRUCTURE President Management Council Secretary General Administrative Executive Administrative Assistant Technical Executive Clerk/Dispatch

MEMBERSHIP Ordinary Members 49 - Franchise holders with local assembly interests - Full fledged local assembly plants - Franchise holders with full fledged downstream activities Associate Members 4 - Sole distributors with full fledged downstream activities Subscribers 182 - Companies subscribing to monthly statistics Total 235

CONTENTS 2. Overview of the Malaysian automotive industry

OVERVIEW OF THE MALAYSIAN AUTOMOTIVE INDUSTRY 18 licensed motor vehicle assembly plants and manufacturers in operation. 1 Note : Excluding two-wheelers plants. Total production capacity: 800,000 units. 2 550 component parts manufacturers Total employment: around 550,000 workers. 3 Contribution to national GDP: 3.4%

OVERVIEW OF THE MALAYSIAN AUTOMOTIVE INDUSTRY (Cont..) More than 50 makes of vehicles available in the domestic market. Ranging from local brands such as PROTON and PERODUA to international makes like Toyota, Honda, Nissan, BMW, Land Rover, etc. Sales made up of local assembled vehicles and imported CBU vehicles

3. MARKET SITUATION: PRODUCTION & SALES DATA

MALAYSIA ~ PRODUCTION DATA Notes: Passenger Vehicles include all passenger carrying vehicles i.e. Passenger Cars, 4WD/SUV, Window Vans and MPVs. Commercial Vehicles include Trucks, Prime Movers, Pick-ups, Panel Vans & Buses.

MALAYSIA: PRODUCTION BY TYPES OF VEHICLE SEGMENT YEAR-TO-DATE DECEMBER VARIANCE 2013 2012 UNITS % Total Industry Volume (TIV) 601,407 569,620 31,787 5.6 PV (Passenger Vehicles) 543,892 509,621 34,271 6.7 PC (Passenger Cars) 426,154 399,913 26,241 6.6 WV (Window Vans) 5,610 6,075 (465) (7.7) MPV (Multi-Purpose Vehicles) 89,034 93,635 (4,601) (4.9) 4x4/SUV (Four Wheel Drive / Sports Utility Vehicles) 23,094 9,998 13,096 131.0 CV (Commercial Vehicles) 57,515 59,999 (2,484) (4.1) PV (Panel Vans) 3,057 4,497 (1,440) (32.0) PU (Pick Ups) 34,227 34,435 (208) (0.6) Trucks 18,106 19,567 (1,461) (7.5) PM (Prime Movers) 1,269 911 358 39.3 Bus 856 589 267 45.3

MALAYSIA: PRODUCTION BY TYPES OF VEHICLE SEGMENT YEAR-TO-DATE FEBRUARY Variance 2014 2013 units % Total Industry Production (TIP) 103,183 97,017 6,166 6.4 PV (Passenger Vehicles) 93,966 86,607 7,359 8.5 PC (Passenger Cars) 74,721 68,057 6,664 9.8 WV (Window Vans) 1,247 1,101 146 13.3 MPV (Multi-Purpose Vehicles) 12,977 15,101 (2,124) (14.1) 4x4/SUV (Four Wheel Drive / Sports Utility Vehicles) 5,021 2,348 2,673 113.8 CV (Commercial Vehicles) 9,217 10,410 (1,193) (11.5) PV (Panel Vans) 309 673 (364) (54.1) PU (Pick Ups) 5,290 6,166 (876) (14.2) Trucks 3,179 3,268 (89) (2.7) PM (Prime Movers) 297 182 115 63.2 Bus 142 121 21 17.4

MALAYSIA ~ SALES FROM 1997 TO 2013 Unit 700,000 655,793 600,000 605,156 500,000 400,000 300,000 200,000 404,837 288,547 434,954 PV CV 4x4 TIV 100,000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year

MALAYSIA: SALES BY TYPES OF VEHICLE SEGMENT YEAR-TO-DATE DECEMBER VARIANCE 2013 2012 UNIT % Total Industry Volume (TIV) 655,793 627,753 28,040 4.5 PV (Passenger Vehicles) 576,657 552,189 24,468 4.4 PC (Passenger Cars) 446,939 427,611 19,328 4.5 WV (Window Vans) 6,323 5,974 349 5.8 MPV (Multi-Purpose Vehicles) 94,930 99,737 (4,807) (4.8) 4x4/SUV (Four Wheel Drive / Sports Utility Vehicles) 28,465 18,867 9,598 50.9 CV (Commercial Vehicles) 79,136 75,564 3,572 4.7 PV (Panel Vans) 4,628 4,708 (80) (1.7) PU (Pick Ups) 53,591 51,320 2,271 4.4 Trucks 18,879 17,649 1,230 7.0 PM (Prime Movers) 1,176 1,137 39 3.4 Bus 858 750 108 14.4

MALAYSIA: SALES BY TYPES OF VEHICLE, 2013 PASSENGER COMMERCIAL 16.5% 4WD/S UV MPV 77.5% W/Van 4.9% 1.1% PC 23.9% P/Move rs 1.5% Bus P/Van 5.8% Trucks P/Up 67.7% 1.1%

MALAYSIA: SALES BY TYPES OF VEHICLE SEGMENT YEAR-TO-DATE FEBRUARY Variance 2014 2013 units % Total Industry Volume (TIV) 100,991 100,112 879 0.9 PV (Passenger Vehicles) 90,406 89,197 1,209 1.4 PC (Passenger Cars) 70,432 70,307 125 0.2 WV (Window Vans) 764 810 (46) (5.7) MPV (Multi-Purpose Vehicles) 14,383 15,251 (868) (5.7) 4x4/SUV (Four Wheel Drive / Sports Utility Vehicles) 4,827 2,829 1,998 70.6 CV (Commercial Vehicles) 10,585 10,915 (330) (3.0) PV (Panel Vans) 522 540 (18) (3.3) PU (Pick Ups) 7,303 7,650 (347) (4.5) Trucks 2,292 2,423 (131) (5.4) PM (Prime Movers) 271 143 128 89.5 Bus 197 159 38 23.9

MARKET PROSPECTS 2014 Malaysia s GDP Growth 2013 : 4.7% 2014 (forecast) : 5.0% to 5.5%

MARKET PROSPECTS 2014 2014 FORECAST 2013 ACTUAL VARIANCE UNITS % PASSENGER VEHICLES COMMERCIAL VEHICLES TOTAL VEHICLES 589,600 576,657 12,943 2% 80,400 79,136 1,264 2% 670,000 655,793 14,207 2%

ASEAN ~ PRODUCTION & SALES TREND 4,500 4,238 4,000 3,500 3,102 3,473 3,000 2,704 Unit 000 2,500 2,301 2,516 2,000 1,500 1,255 2,072 2,127 1,000 1,182 500-2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 ASEAN TIV 1,182 1,353 1,538 1,857 2,072 1,783 1,887 2,127 1,913 2,516 2,594 3,473 ASEAN TIP 1,255 1,442 1,620 1,937 2,301 2,077 2,278 2,704 2,124 3,102 2,995 4,238

ASEAN TOTAL VEHICLES PRODUCTION: SHARE BY COUNTRY, 2013 Vietnam, 2% [CATEGO RY NAME], [CATEGO 27% RY NAME] [VALUE] COUNTRY YTD DEC 2013 ('000 unit) Thailand 2,457 [CATEGO RY NAME], 56% Malaysia, 13% Indonesia 1,208 Malaysia 601 Vietnam 94 Philippines 79 TOTAL 4,439

ASEAN TOTAL VEHICLES SALES : SHARE BY COUNTRY, 2013 Brunei 1% Vietnam 3% COUNTRY YTD DEC 2013 ('000 unit) Thailand 1,331 Thailand 37% Philippines 5% Indonesia 1,230 Malaysia 18% Indonesia 35% Singapore 1% Malaysia 656 Philippines 182 Vietnam 99 Singapore 34 Brunei 19 TOTAL 3,551

CONTENTS 4. Automotive Policy & Its Evolution

EVOLUTION OF AUTO POLICY 1950s: Importation of CBUs vehicles. 1963: The Government begun to encourage the establishment of automotive industry. This was to spearhead the nation s industrialisation programme and substitute imports. 1967: Six assembly plants approved. Swedish Motor Assemblies Sdn Bhd was the first to begin production assembling Volvo cars in Dec 1967 4.

EVOLUTION OF AUTO POLICY (Cont.) 1970s: Importation of CBUs required import licenses. Local content policy was adopted to enhance the development of local parts and components industry. 1980: Mandatory Deletion Items (MDI) policy. This MDI policy prohibits assemblers from importing all components listed as mandatory for use in local assembly. 5

EVOLUTION OF AUTO POLICY (Cont ) 1983: National car project: birth of PROTON. 6 Tun Dr Mahathir s vision of propelling Malaysia into an era of heavy industries and developing local vendors. 1985: Proton Saga made its debut 7.

EVOLUTION OF AUTO POLICY (Cont.) 1992: Local Material Content Policy (LMCP) introduced. The purpose was to increase the usage of locally manufactured components which thus expedited the development of the local component industry. The targeted percentage of local components for all range of motor vehicles over a five-years period was 45 to 60 per cent. 1992: Second National car project: birth of PERODUA. 8

EVOLUTION OF AUTO POLICY (Cont.) 1993: ASEAN Free Trade Area (AFTA) officially initiated. 9 1994: Perodua Kancil made its debut. 10 2002/3: Commencement of gradual liberalization. 11 By end 2003, no more Mandatory Deletion Items programme.

EVOLUTION OF AUTO POLICY (Cont.) 2006: National Automotive Policy (NAP) introduced. 12 To facilitate the required transformation and optimal integration of the local automotive industry into regional and global industry networks within the increasingly liberalised and competitive global environment. 2009: Review of NAP with the aim of fostering a more competitive industry and freer market. 13 The freeze on issuance of new manufacturing licence was lifted for PV with engine capacity of 1,800 cc and above and OTR prices of not less than RM150,000.

EVOLUTION OF AUTO POLICY (Cont.) 2010: A complete free trade area in ASEAN-6. 14 Launch of Malaysia Automotive Institute. 15 2011: Further review on the NAP. The government decided on a further review because a number of objectives of the revised NAP released in October 2009 have not been met and following much changes in the global automotive landscape in recent years. 16

NATIONAL AUTOMOTIVE POLICY 2014 NAP 2014 was unveiled on 20 January 2014. Objectives of NAP 2014: a. Promote a competitive and sustainable domestic automotive industry; b. Make Malaysia the regional hub in Energy Efficient Vehicles (EEV); c. Promote increase in value-added activities in a sustainable manner;

NATIONAL AUTOMOTIVE POLICY (Cont.) d. Promote increase in exports of vehicles and automotive components; e. Promote participation of Bumiputera companies in the total value chain of the domestic automotive industry; and f. Safeguard consumers interest by offering safer and better quality products at competitive prices.

ENERGY EFFICIENT VEHICLES (EEV)

ENERGY EFFICIENT VEHICLES EEV SPECIFICATION FOR CARS SEGMENT DESCRIPTION KERB WEIGHT (KG) FUEL EFFICIENCY (L/100KM) A Micro Car < 800 4.5 City Car 801 1,000 5.0 B Super Mini Car 1,001 1,250 6.0 C Small Family Car 1,251 1,400 6.5 D Large Family Car 1,401 1,550 Compact Executive Car 7.0 E Executive Car 1,550 1,800 9.5 F Luxury Car 1,801 2,050 11.0 J Large 4x4 2,051 2,350 11.5 Others Others 2,351 2,500 12.0

ENERGY EFFICIENT VEHICLES EEV SPECIFICATION FOR TWO WHEELERS ENGINE SIZE FUEL EFFICIENCY (L/100KM) 50 100 2.0 101 150 2.2 151 200 2.5 201-250 3.0

EEV INCENTIVES Incentives: Customized incentives for both foreign direct investment and domestic investment such as: Pioneer Status Investment Tax Allowance (ITA) Grants (R&D, Training) Infrastructure facilitation Lower Taxes Expatriates. Investment Conditions: None

TARGETS OF NAP 2014 TOWARDS 2020 ITEMS 2020 2013 Employment Manufacturing Aftermarket Additional 70,000 Additional 80,000 250,000 300,000 Export of Parts & Components RM 10 Billion RM 5 Billion Export of Recycled Materials & Remanufactured Components RM 2 Billion 0 38

TARGETS OF NAP 2014 TOWARDS 2020 ITEM 2020 2013 Passenger Car Total Production Vol. 1.25 mil units 601,407 units Total Industry Vol. 1.0 mil units 655,793 units Exports 250,000 units ~20,000 units Commercial Vehicles Total Production Vol. 100,000 units 57,515 units Motorcycle Total Production Vol. 800,000 units ~430,000 units

CONTENTS 5. Malaysia: tariffs of motor vehicles

MALAYSIA: TARIFFS Motor Cars (including Station Wagons, Sports Cars and Racing Cars) IMPORT DUTY LOCAL TAXES CBU CKD CBU & CKD Engine Capacity (cc) MFN ATIGA MFN ATIGA Excise Duties Sales Tax < 1,800 30% 0% 10% 0% 75% 10% 1,800-1,999 30% 0% 10% 0% 80% 10% 2,000 2499 30% 0% 10% 0% 90% 10% Above 2,500 30% 0% 10% 0% 105% 10%

MALAYSIA: TARIFFS Four Wheel Drive Vehicles IMPORT DUTY LOCAL TAXES CBU CKD CBU & CKD Engine Capacity (cc) MFN ATIGA MFN ATIGA Excise Duties Sales Tax < 1,800 30% 0% 10% 0% 65% 10% 1,800-1,999 30% 0% 10% 0% 75% 10% 2,000 2499 30% 0% 10% 0% 90% 10% Above 2,500 30% 0% 10% 0% 105% 10%

MALAYSIA: TARIFFS Other Types Of Vehicles (MPVs, Vans) IMPORT DUTY LOCAL TAXES CBU CKD CBU & CKD Engine Capacity (cc) MFN ATIGA MFN ATIGA Excise Duties Sales Tax < 1,500 30% 0% NIL 0% 60% 10% 1,500-1,799 30% 0% 10% 0% 65% 10% 1,800-1,999 30% 0% 10% 0% 75% 10% 2,000 2499 30% 0% 10% 0% 90% 10% Above 2,500 30% 0% 10% 0% 105% 10%

MALAYSIA: TARIFFS Commercial Vehicles IMPORT DUTY LOCAL TAXES CBU CKD CBU & CKD Class MFN ATIGA MFN ATIGA Excise Duties Sales Tax All 30% 0% NIL 0% NIL 10%

CONTENTS 6. Free Trade Agreements signed

MALAYSIA S FREE TRADE AGREEMENTS INVOLVEMENT International trade is an important contributor to Malaysia's economic growth and development. Malaysia is pursuing regional and bilateral trading arrangements to complement the multilateral approach to trade liberalisation. Details of FTAs concluded and under negotiations are summarized as below: Regional (ASEAN): AFTA, China, Japan, Korea, India and Australia- New Zealand Bilateral: Japan, Pakistan, Chile, India, New Zealand, Australia Under negotiation: EU, Trans-Pacific Partnership (TPP), and Turkey

MALAYSIA S FREE TRADE AGREEMENTS INVOLVEMENT (cont ) Examples of import duties reductions as follows: MALAYSIA AUSTRALIA FREE TRADE AGREEMENT DESCRIPTION 2013 (%) 2014 (%) 2015 (%) 2016 (%) CKD all segments 0 0 0 0 CBU: Passenger Car less than 2500 cc Passenger Car 2500 cc & above 15 10 5 0 0 0 0 0

MALAYSIA S FREE TRADE AGREEMENTS INVOLVEMENT (cont ) Examples of import duties reductions as follows: MALAYSIA JAPAN ECONOMIC PARTNERSHIP AGREEMENT DESCRIPTION 2013 (%) 2014 (%) 2015 (%) 2016 (%) CKD all segments 0 0 0 0 CBU: Passenger Car less than 2000 cc Passenger Car 2000 cc & above 13.6 9.1 4.6 0 0 0 0 0

CONTENTS 7. Safety & environment issues

SAFETY & ENVIRONMENT ISSUES 1. Malaysia is a contracting party to WP29, thus all domestic technical regulations are fully aligned with the relevant UN standards. 18 2. Malaysia has incorporated the relevant UN Regulations into our Road Transport Act 1987 and Environmental Quality Act 1974. 3. The Ministry of Transport (MOT) has been appointed as the government agency responsible for coordinating and participating in WP29 activities. 4. The regulations relating to motor vehicles are generally under the purview of the MOT in terms of implementation of regulations and policy.

SAFETY & ENVIRONMENT ISSUES (cont..) 5. The Road Transport Department (RTD), an agency under the MOT is in charged of enforcing the gazetted regulations. 6. The Ministry of Natural Resources and Environment is in charge of implementation of regulations and policies relating to environment. 7. The Department of Environment (DOE), an agency under the MNRE, is in charged of enforcing the gazetted regulations. 8. The government agencies normally consult with the industry on regulation making process.

UN-R Adoption Status: 1958 Agreement Year Gazetted 1996 and earlier Number of UN Regulations gazetted UN Regulations (applicable to vehicle categories L, M, N and O) 4 (1) R15, (2) R16, (3) R24, (4) R49 2007 12 (1) R30, (2) R39 (3) R48 (HID only), (4) R52, (5) R54, (6) R66, (7) R80, (8) R98, (9) R99, (10) R108, (11) R109, (12) R112 2010 4 (1) R18, (2) R62, (3) R97, (4) R118 2011 35 (1) R3, (2) R6, (3) R7, (4) R13, (5) R13H, (6) R14, (7) R17, (8) R25, (9) R28, (10) R39, (11) R40, (12) R41,(13) R43, (14) R46, (15) R48, (16) R50, (17) R51, (18) R53, (19) R58, (20) R69, (21) R70, (22) R73, (23) R75, (24) R78, (25) R79, (26) R81, (27) R83, (28) R90, (29) R93, (30) R94, (31) R95, (32) R100, (33) R104, (34) R112, (35) R113 2012 1 R22 2013 23 (1) R4, (2) R10, (3) R11, (4) R19, (5) R21, (6) R23, (7) R26, (8) R34, (9) R37, (10) R38, (11) R44, (12) R45, (13) R55, (14) R60, (15) R61, (16) R64, (17) R77, (18) R89, (19) R91, (20) R101, (21) R117, (22) R119, (23) R121 Total 79

ENVIRONMENT ISSUES Fuel standards. Current: Euro 2M (introduced on 1 Sept 2009) Future plan: Euro 4M Regulation had been gazetted on 2 Sept 2013 Enforcement date targeted for 1 June 2015. Exhaust Emission Regulations. Euro 4M Emission regulations yet to be finalised. 19