Business and Market Overview on Malaysia

ECONOMY. Malaysia is a middle-income economy and has the third highest GDP per capita (US$4,625) among the Southeast Asian countries after Singapore and Brunei. The country was primarily a producer of raw materials but transformed its economy from the 1970s to the 1990s into a multi-sector economy. Malaysia's economic growth is export driven mainly from exports of electrical and electronic products.

Malaysia's economy is relatively stable with healthy foreign exchange reserves and a GDP of US$118.3 billion in 2004. From 2000 to 2004, Malaysia's real GDP grew by an annual average of 5.7% while inflation remained below 2.0% and unemployment below 4.0%. The Asian economic crisis of 1997 adversely affected Malaysia's economy during the period. It is unlikely that the country will experience an economic crisis similar to 1997 with current healthy foreign exchange reserves, low inflation and small foreign debt.

The manufacturing sector accounted for 48.5% of Malaysia's GDP in 2004, services accounted for 42.4% and the agriculture sector accounted for 9.1%. Major industries include electronic & electrical products, textiles, clothing & footwear, chemicals, petroleum, wood and metal products. Major agriculture industries include palm oil, rubber, cocoa, rice, poultry and timber.

DEMOGRAPHY. Malaysia comprises of Peninsular Malaysia and East Malaysia (located on the northern half of the island of Borneo) with a population of 26 million. Malaysia is a multi-ethnic society comprising of the predominant indigenous Malays (50%) followed by the Chinese (24%) and Indians (7%). Other indigenous groups (11%) include the Ibans, Kadazans, Melanaus and Kelabits. Major religion practiced is Islam followed by Buddhism, Taoism, Hinduism and Christianity. Major languages used are Malay (national language), English (commonly used in business), Chinese (mainly Mandarin, Hokkien and Cantonese) and Tamil.

Malaysia's population is becoming increasingly urban. The country's urban population increased from 54.7% to 62.8% of Malaysia's total population from 1995 to 2004. Main reason is increasing employment opportunities in the major urban areas. Major urban areas include the nation's capital Kuala Lumpur and the surrounding areas (known as the Klang Valley), Penang, Johor Bahru, Ipoh, Kuantan, Kuching and Kota Kinabalu.

Households in the urban areas have an average income that is twice than those in the rural areas. An estimated 5% of Malaysian households live below the poverty level while 50% are low-income households. The proportion of medium income households is 33% while high-income households are 10%.

INFRASTRUCTURE. Malaysia has a well-served international and domestic telecommunication system. Cities and towns are well connected by roads including highways and public transport. Internet broadband services are available in the cities and major towns. Malaysia has an international airport situated near Kuala Lumpur and airports across the country serving mainly domestic travel.

INTERNATIONAL TRADE. Malaysia's major trading partners include the United States, Japan, China, Singapore, Thailand, Taiwan and South Korea. Major exports from the country include electrical and electronic products, machineries, petroleum and liquefied natural gas (LNG), textiles, clothing & footwear, palm oil, furniture and sawn timber. High technology exports (mainly electrical and electronic products) account for more than 50% of Malaysia's exports. Major imports include electrical and electronics, machineries and equipments, petroleum products, plastics, iron and steel products, chemicals and foods.

CONSUMER USAGE OF TECHNOLOGY. Nearly 75% of all homes have fixed line telephones and there are 15 million mobile phone subscribers for a population of nearly 26 million in 2004. Penetration of personal computers in homes was nearly 30% during the period with 3.5 million internet subscribers and 10 million internet users. More than 90% of all Malaysian homes have refrigerators and televisions. Nearly all middle and high-income homes have cars and most have more than one. The estimated penetration of cars in homes is between 75% and 80%. Thus, many low-income homes have cars but tend to be lower-end models or cheaper second hand cars. Furthermore, nearly all lower income homes have motorcycles for their travelling needs.

RETAIL MARKET. Retail sales in Malaysia reached an estimated US$14 billion in 2004 and forecast to grow further to US$20 billion by 2010. The Klang Valley (Kuala Lumpur and the surrounding areas) contributes nearly 30% of the country’s total retail trade. The traditional "mom and pop" establishments dominate Malaysia’s retail industry while shopping at the modern retail establishments such as hypermarkets, supermarkets, departments, mini-markets and convenience stores is gaining popularity. These modern establishments account for nearly 25% of the total retail sales. Shopping at the traditional open-air markets remains popular among Malaysia’s low, medium and even high-income consumers because of their festivity atmosphere.

FOOD CULTURE. Malaysia has three major ethnic food cultures i.e. Malay, Chinese and Indian foods. Rice is the staple food followed by various types of noodles and Indian bread. Malay dishes tend to be hot and spicy, Indian foods are usually curry dishes while Chinese foods are salty. However, the various ethnic communities have adapted foods from other communities. Western baked bread and bakeries and fast foods are popular and affordable even among many in the lower income group.

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Malaysia's economic situation will bode well for luxury car sales

While a gloomy cloud is still expected to hover over the global motor vehicle market for the rest of 2009, BMW Malaysia Sdn Bhd is cautiously optimistic that the situation in Malaysia will be a little bit different, said managing director Geoffrey Briscoe.

He said the Malaysian economy was faring well compared with the rest of the world and this would bode well for the local motor vehicle industry, especially the luxury segment.

Geoffrey Briscoe ... “The Malaysian economy is holding up well.’

“The Malaysian economy is holding up well. People are still spending. We’re not bullish about the rest of 2009 because we still feel that there are still tough times ahead,” he told StarBiz in an interview, adding that the local motor vehicle industry should “pick up” in 2010.

“Our finance rates are low. BMW Malaysia also provides good financial packages through its credit arm, BMW Credit, and our inventories are still high, so there has never been a better time to buy a BMW,” he added.

For the first seven months of 2009, BMW Malaysia sold 2,048 units compared with 2,133 during the same period in 2008.

It sold 3,512 BMW vehicles and 201 Mini cars in total last year.

BMW Malaysia’s share of the luxury segment was north of 40%, Briscoe said, adding that despite the dip in the 2009 year-to-date sales, he was upbeat about the company’s prospects going forward.

“Given the current economic climate, we are just 4% down in terms of sales volume. There are still several months to go for 2009 and we would be delighted if we could sell as many cars as we did last year,” he said.

BMW Malaysia’s bestseller is its 3-series (which averages 150 units a month) and the 5-series models.

“Our 3- and 5-series tend to go neck and neck in terms of volume but it’s usually the 3-series that’s ahead. We provide great financial packages for these models through BMW Credit,” Briscoe said.

BMW Malaysia has a majority of its 3- and 5-series completely-knocked-down models built at its plant in Kulim, Kedah, which is operated in partnership with plantation giant Sime Darby Bhd. Briscoe said the plant’s capacity was virtually “limitless.”

“The capacity of the plant can be extended to where we need it to be. We’d love to build more cars, like the X1 and 7-series and we are working with the Government to build those and other models in Malaysia,” he said.

As part of its strategy to provide “efficient dynamics,” BMW Malaysia plans to launch four diesel-powered vehicles in the last quarter of 2009; three of them sedans. The vehicles are expected to be in the 2.0 to 3.0-litre range.

“The diesel segment in Malaysia comprises either SUVs (sport utility vehicles) or commercial vehicles. There’s no passenger market for diesel and we want to create one,” Briscoe said.

He added that diesel-powered engines provided better torque and were more powerful, more fuel-efficient and produced less carbon dioxide (CO2) emissions compared with their petrol-based counterparts.

Briscoe said about 60% of cars sold in Europe were equipped with diesel engines.

The high sulphur content in Malaysian diesel fuel has hindered performance and deterred many car companies from introducing diesel-powered vehicles.

While diesel-powered BMW vehicles were already capable of handling the substandard diesel quality here, Briscoe said the introduction of the four new models was timely as Petronas was launching its Euro 2M standard diesel nationwide tomorrow.

“The Euro 2M diesel has low sulphur content of less than 500 parts per million (ppm) compared to some 3,000 ppm. To a layman like myself, that sounds like a huge reduction and great for the environment!

“We feel that our timing is spot-on because we are bringing in the right diesel cars at the right time,” he said.

Meanwhile, Briscoe said BMW Malaysia was looking to expand its BMW Premium Selection (BPS) used-car programme to more dealers to combat the local motor vehicle industry’s growing “grey market.”

The grey market refers to the importation of used vehicles from foreign countries to Malaysia by non-franchise car dealerships, which are then sold at a cheaper price. The grey importers do not provide verifiable servicing history or factory-backed warranties.

“There’s nothing worse than having a customer say that they have a bad BMW car, which is why we offer a fully backed BPS car as a viable alternative to the grey imports,” Briscoe said.

Vehicles sold under the BPS programme need to have an approved and documented vehicle history as part of the criteria, pass a strict 72-point check by factory-trained BMW experts, are technically and visually refurbished, less than five years old or have less than 100,000-km mileage.

Two dealers currently run the programme – Auto Bavaria Glenmarie (launched in December 2008) and Ingress Auto (launched in August 2008).

“Sales for (Auto Bavaria) Glenmarie have increased 60%. The used car business currently makes up 40% of their business. It’s been an enormous success,” Briscoe said.

“We’re happy to have Ingress aboard. To be part of the BPS programme, the potential dealer needs to go through a rigorous approval process and sign our BPS agreement that’s three inches thick and we are looking at reaching out to more dealers,” he added.

On another note, Briscoe said he could not agree more with its principal in Germany to pull out of Formula One (F1) next season.

“To be in F1, one needs to make continuous progress and it wasn’t sustainable for BMW to remain in the sport.

“BMW is the greenest luxury car company in the world and spends billions on fuel efficiency and CO2 reduction measures under our ‘efficient dynamics’ programme. It’s only right that its resources are focused on that,” he said.