The Star Online: Business
The Star Online: Business |
- Tougher competition, healthier industry
- World buyers line up to buy US natural gas
- Cameron: China's Wanda to invest up to US$5bil in UK
| Tougher competition, healthier industry Posted: 24 Jan 2014 08:00 AM PST The National Automotive Policy (NAP) is crafted to liberalise and make the auto industry in Malaysia more efficient and dynamic. There will be pain before the gain but the journey towards a freer industry will have its challenges. Perodua boss Datuk Aminar Rashid Salleh and auto industry expert from Frost & Sullivan Kavan Mukhtyar share their insight on the NAP and the changes ahead with StarBizWeek. DATUK AMINAR RASHID SALLEH StarBizWeek: If successful, the National Automotive Policy (NAP) will see global energy-efficient vehicle (EEV) manufacturers come to Malaysia. That is in direct competition with what Perodua does. How will this affect you and what will your response be? Aminar: Competition in the A and B segments have already started a few years back and with the introduction of the EEV into the market, the competition in the automotive industry will get tougher. We view this development positively as increased competition will only make the industry healthier and more efficient despite the challenges. To meet with these challenges, Perodua has embarked on a strategic 5-year roadmap to make us globally competitive in terms of quality, cost and delivery. Within these are three factors include pricing, quality product offerings and high standard of service (for both sales and after sales) as well as parts. These initiatives are already bearing fruit such as the Perodua S-Series introduced last year and the new Alza introduced recently which not only include better offerings but also on-the-road price reduction across our model line-up. In addition, we have given all our customers (who purchase their vehicle since March 2013 and this year) a 3-year free service package as we believe that value is not only reflected in the price but overall ownership experience and the total cost of ownership. How do you think the reduction of car prices would impact the company and its profit margins, if at all? What will Perodua do to address this? In the revised NAP announced recently, the International Trade and Industry Minister mentioned that there will be a gradual price reduction of vehicles. That being said, the actual reduction will be determined by the original equipment manufacturers (OEMs) themselves after taking into consideration competition due to the liberalisation of the automotive market. For the industry in general, cost is a big factor in car pricing and hence the importance of cost reduction activities across the supply chain would be essential towards being price competitive in the market while continue to enjoy reasonable profit margins. For Perodua, we have embarked on a 5-year strategic roadmap (since 2011) to ensure that our entire supply chain will be able to compete and reap the benefits of liberalisation. Apart from cost, we also need to improve on our productivity and efficiency in all aspects of our operations, including reducing or eliminating wastages. This journey will continue as there is always room for improvement. We have also put more emphasis on our after-sales services to enhance our customer experience while at the same time introducing more value-added products and services such as Perodua's Pre-owned Vehicle business. This used-car business is more towards supporting our sales operations by making it easier for our customers to trade in their current vehicle for a new Perodua. These initiatives are designed to ensure that our customers' needs are well looked after. In summary, while there is a strong desire and intention to bring down vehicles prices, sometimes it may not be possible. As an alternative, we give added value to our vehicles while at the same time bring down the cost of ownership. This is part and parcel of Perodua's original mandate to manufacture and market quality-yet-affordable, value-for-money vehicles for Malaysians. What do you feel on the NAP details announced and what do you think is needed to make the NAP a success? We are thankful that the Government has taken most of our views into consideration on the revised NAP. We believe that constant engagement with the relevant stakeholders – for example OEMs, consumers and media – is crucial in making the NAP a success. Close monitoring is also crucial to ensure that projects undertaken are on track. That being said, there are still more details to be announced regarding the NAP, as the Government has requested for more time to do an in-depth study on a few issues. While Thailand and Indonesia may have had a headstart, we believe that Malaysia can still create a niche in the EEV market and complement the neighbouring countries. There must be commitment from all stakeholders to ensure the success of the revised NAP and for the local automotive industry to move forward. On the whole, how will the NAP affect Perodua's business? The NAP has issued a challenge to the OEMs to be more competitive and we have taken this positively. Perodua is mandated to produce affordable yet high-quality compact cars and we will continue to do so. In this sense, there will be no change. What is expected to change is the level of competition, which is expected. In meeting this, we will commit to our 5-year strategic roadmap to ensure that we will be relevant in the automotive industry. The strategic roadmap focuses on four areas of transformation: ·Production ·Products and services ·Research and development and procurement ·Customer services and satisfaction Perodua will continue to invest and we (along with our partner Daihatsu Motor Co of Japan) are committed to improve and develop the local automotive industry. We are happy yet humble to be where we are today as the most preferred automotive brand in the country and we aim to increase our footprint outside Malaysia in the near future. We will soon embark on the second phase of the 5-year strategic roadmap that will propel Perodua into 2020.  Kavan: 'The policy indicates that Malaysia has chos en the path of progressive liberalis ation rather than disrup tive liberalis ation.' KAVAN MUKHTYAR StarBizWeek: What are your thoughts on the NAP in general? In your opinion, how does this NAP (2014) leverage over its predecessor? Kavan: In our opinion, the NAP 2014 is a fine balancing act between the priorities of attracting new investments, developing sustainable industry competitiveness on one hand and safeguarding the interests of existing investors and stakeholders. The policy indicates that Malaysia has chosen the path of progressive liberalisation rather than disruptive liberalisation. There are several policy signals that demonstrate Government's intent to further open the market over the next four to five years. Many of the stated policy measures are at a macro level, and the effectiveness of the customised incentives to attract investments will depend on the specifics of the benefits available. In summary, the NAP is along expected lines and can be viewed as a first step in a journey towards progressive market liberalisation. The aim of the NAP is basically to attract more investments into the country. Do you think this can be realised? What, in your opinion, might need to be done further (by the Government or car players) to bring in further investments? Unlike Thailand and Indonesia, the Malaysian EEV policy covers a wide range of vehicle segments including luxury vehicles. So there could be some possible opportunities. However, the actual investments will depend on how the incentives are compared with what other countries are offering. In addition, OEMs will also consider other market demand and supply-chain strength factors. The potential EEV market needs to be large enough for the investments to be economically viable. At the same time, the automotive part supply chain needs to be competent to support the OEMs. In other words, attractive incentives will need to be combined with a push to generate demand and build competencies in the supply chain. If Malaysia is able to move fast and implement projects rapidly, then it has an opportunity to attract investments. With the freeze on manufacturing licences for vehicles below 1.8-litre lifted, how do you think this will affect players within this segment, especially for Proton and Perodua? What would they need to do to prepare for increasing competition? If Malaysia is able to get additional investments in the A (city cars), B (small and compact cars) and C (mid-sized sedans) vehicle segments, then the national makes will face intense competition. Proton and Perodua will need to launch new models faster with greater fuel efficiency at more competitive prices. They will have to grow scale. Also, we believe they need to move urgently to expand beyond Malaysia to grow their volumes. Opportunities in after-sales and accessories, vehicle finance and genuine auto parts should also be pushed forward to bring in higher margin revenue streams. Related stories: Auto policy makes big pitch in bringing in manufacturers of energy-efficient vehicle |
| World buyers line up to buy US natural gas Posted: 24 Jan 2014 03:28 PM PST LONDON/NEW YORK: Countries across the world have been quietly signing deals in recent months to import natural gas from the United States, revealing a growing appetite for the fuel overseas as domestic output soars. Up to a dozen long-term deals, each worth billions of dollars, have been penned behind closed doors with companies in China, Japan, Taiwan, Spain, France and Chile as global demand spikes, according to company, industry and trade sources. Through the agreements, China in particular has emerged as one of the biggest beneficiaries of cheap American natural gas that in the coming years will be piped to Gulf Coast plants and liquefied for shipment abroad in tankers. The unannounced deals, which amount to about 2 percent of daily U.S. supply, are not the first of their kind, and they depend on U.S. government approval to construct two new liquefied natural gas (LNG) plants. But the number of new buyers, and their global scope, show how the United States is taking steps to becoming a major export hub by stealing ahead of rivals in Australia and East Africa, successfully wooing needy Asian buyers even before projects begin construction. Global competition may squeeze profit margins on some exports of U.S. gas. Companies like Britain's BP <BP.L> and France's GDF Suez <GSZ.PA>, already committed to taking LNG from the United States, are now finding multiple buyers willing to take tranches of supply. "As we see more contracts getting signed, it's an indication that the U.S. has really cheap natural gas that will help supply the global market," said Jason Bordoff, Director at the Center on Global Energy Policy at Columbia University. The United States is producing record amounts of natural gas thanks to a drilling boom, and more than a dozen export projects have been proposed. But large domestic users of natural gas such as the petrochemical industry are worried that unfettered exports could push prices higher at home. The Obama administration has been approving exports on a case-by-case basis. So far, only four projects are allowed to export across the globe and only one is under construction. Cheniere Energy's <LNG.A> Sabine Pass project in Louisiana, expected to begin shipments late in 2015, has sealed deals with importers in Europe and Asia over the past two years. This latest batch of gas sales will be exported from Sempra Energy's <SRE.N> Cameron LNG plant inLouisiana and the Freeport LNG plant in Texas, sources said. Both plants are expected to begin operations by the end of the decade, pending approvals. Sempra is still waiting on permits to construct the Cameron plant, and to export the gas to countries with which the U.S. does not have a free trade agreement. Freeport has full export approval, but is yet to begin construction. THE DEALS Securing buyers early can make or break an LNG project. Without buyers, a project will not receive financial backing or be built. GDF Suez, which acquired export rights at Cameron last year, has agreed to sell all of its 4 million tonnes per year of capacity to buyers in Japan, Taiwan, China and Chile, according to a review of deals confirmed by industry sources. Japan's Mitsubishi <8058.T> and Mitsui <8031.T>, also with export rights at Cameron, have separately targeted major buyers such as Spain's Repsol <REP.MC>, France's Total <TOTF.PA> and Japanese utilities. Mitsubishi is to sell a significant chunk of LNG to its own trading arm in Singapore. Sources said Japanese buyers were reluctant to commit to large deals while the fate of its nuclear fleet remained uncertain after the 2011 Fukushima disaster. Mitsubishi is also in talks with Indian Oil Corp. <IOC.NS> to sell 1 mtpa of LNG for its planned terminal atEnnore in southern India, a company executive said. Exact volumes may be adjusted. Sempra hopes to make a final investment decision to build the Cameron plant later this year. Once that decision is made, the deals agreed by GDF Suez, Mitsui and Mitsubishi automatically become formal sales agreements, industry sources said. The San Diego-based company expects to win export approval from the U.S. Department of Energy before April. Meanwhile, BP is in talks to export LNG from the Freeport plant to China National Offshore Oil Corporation (CNOOC), giving the British company a foothold in the world's largest energy consumer. This and older deals with other exporters will soon make China one of the largest importers of U.S. gas. BP has a further deal to supply Japanese utility Tepco with 0.5 mtpa, sources said. BP declined to comment. Mitsui and its prospective Japanese utility customers Kansai Electric andTohoku Electric also declined comment. For a full list of deals, see table. More than 12 million tonnes per year (mtpa) of LNG would be exported from the United States under the deals, or around 1.5 billion cubic feet per day of gas, though some volumes may alter in final negotiations, sources said. U.S. daily production is about 70 billion cubic feet. "These deals will send a signal that there is still strong demand for U.S. LNG volumes," said Andres Rojas, analyst at Waterborne Energy in Houston. GDF was also in talks with Thailand's PTT but these were abandoned after a failure to agree terms last year, a senior PTT source said. Mitsui also broke off talks with South Korean importer GS Caltex, a source at the company said. HARD SELL Despite these recent deals, sellers have found it harder than expected to find new buyers, and have had to offer favorable terms when they do. A projected LNG supply spike between 2016-2020 from North America, Australia, east Africa, Russia andAsia has empowered buyers to push down the price of long-term deals being negotiated now. This is partly reflected in the low profit margins U.S. exporters stand to make from many of the recently concluded agreements. "The United States is not the only gas producer, so we are competing in a market with countries likeQatar, Malaysia, Australia and potentially East Africa," Bordoff said. "There is not infinite demand. There is only so much supply that the global market can take." In its first long-term LNG deal into Asia, GDF Suez is selling 0.8 mtpa to Taiwan's CPC from 2018 at barely breakeven levels. According to the price formula reviewed by sources, CPC will pay around $12 per million British thermal units for the gas in the first year of the contract, a steep discount to the $16 its pays for LNG prices in Asia linked to oil. Moreover, America's edge over rivals could easily dim should domestic gas prices rise nearer to pre-shale boom levels and crude oil prices simultaneously drop to around $80 a barrel. At those levels, LNG deals linked to oil begin to look globally competitive, handicapping buyers of American gas. Bearing these risks in mind, buyers nevertheless want limited exposure to U.S. LNG primarily as a way of negotiating down prices in oil-indexed, long-term contracts with Qatar and Australia.- Reuters |
| Cameron: China's Wanda to invest up to US$5bil in UK Posted: 24 Jan 2014 03:25 PM PST LONDON: Dalian Wanda, the property developer headed by China's richest man, plans to invest up to 3 billion pounds ($5 billion) in regeneration projects in Britain, Britain's prime minister said on Friday. Prime Minister David Cameron unveiled the investment after meeting Dalian Wanda's chairman Wang Jianlin in Davos this week. It comes after Cameron led the largest-ever British mission to China last December that involved about 100 business people. "When I met Chairman Wang Jianlin during my recent trade visit to China, I encouraged him to make further investment into Britain. So I'm delighted that Wanda has decided to invest 2-3 billion pounds in regeneration projects so soon after my visit," Cameron said. "This will help to create jobs in Britain and it's a great example of how we can benefit from foreign investment." Last year Cameron launched a government-backed body to help foreign investors identify and fund UK regeneration projects after securing international funds for the Battersea Power Station project and Chinese investment for London's Nine Elms and Royal Albert Dock and Manchester City Airport. He said 100 billion pounds worth of possible projects were on the table but on Friday he did not outline where Dalian Wanda's investment would go. Wang is China's richest man with a net worth of $14 billion according to Forbes magazine. Dalian Wanda, a privately-held conglomerate that owns over $60 billion in hotels, commercial properties and department stores, has expanded rapidly outside China in recent years. The company cut its first British deals in June last year when it said it would spend $1.6 billion to build an luxury London hotel and buy British yacht maker Sunseeker. Dalian Wanda said it wanted to invest in "cultural tourism" projects but did not specify how many it planned to invest in, or whether it was currently looking at any opportunities. In September, Wang unveiled a planned 50 billion yuan ($8.26 billion) "motion-picture" city in China's coastal Qingdao city, comprising of an indoor amusement park, hotels and the world's first underwater studio. Foreign investors from Malaysia, Qatar and China have been the source of much-needed finance for austerity-weary Britain's regeneration schemes in recent years, particularly in London, which they see as a safe and stable haven to park their cash. Chinese state-owned developer Greenland Group purchased an disused brewery development plot earlier this month to convert into homes while developer Advanced Business Park signed a deal last year to convert a derelict site near London's City airport into offices.- Reuters |
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