TPP enables M'sia automotive to edge Thailand, Indonesia - Frost & Sullivan

Vice-President of Mobility Vivek Vaidya said Malaysia would have a competitive advantage as an export hub for auto parts in the ASEAN region.

"Thailand was already ahead of Malaysia on free trade agreements (FTAs) and they had several FTAs which were working well for them.

"Therefore, TPP is like one ticket that Malaysia buy to have an agreement with Japan, Canada, Australia, the US and Latin America," he told Bernama on the sidelines of a media briefing on Malaysia's 2016 automotive industry here.

The TPP, according to Vivek, would help Malaysian companies gain market access, create opportunities for skills, transfer technology as well as promote transparency and clarity to the industry.

"But local players need to adapt to the ways in which other markets work, they need to be competitive.

"They cannot just carry on business as usual, they need to change," he said.

The trade pact would enable industry players to enter into countries under the TPP, which account for 40 per cent of global gross domestic product (GDP), without being subjected to tax or custom barriers.

"These players will find that they have an edge over Thailand," he said.

Vivek said brands like Mercedes, Honda and other original equipment manufacturers (OEMs) and component manufacturers who have plants in Malaysia would gain by operating from Malaysia.

"When Malaysia is part of TPP, the strategic attractiveness of Malaysia actually enhances because of market access to TPP member states," he said.

Other regional player that also has significant advantage from the TPP's automotive point of view is Vietnam, said Vivek.

"Vietnam is likely to benefit the most because it is more competitive in terms of labour rates," he said.

The 12-nation trade pact, which is expected to be signed in February, would not have any impact on the auto market this year, Vivek added.

"It kicks in after 2018, but for automotive, the tax reduction and excise duty elimination will only start from 2020," he said.

The global growth-consulting firm today projected Malaysia's total industry volume (TIV) to decrease by 1.44 per cent to 648,000 units in 2016 from an estimated 657,500 units last year.