In pursuit of comfort

Malaysian Business, May 16, 2008 by Zahir Ramley

LET'S GET SOME FACTS ABOUT Malaysia's luxury car market right. Firstly, the local market size is not large, but at an estimated fewer than 10,000 annually (and relatively recession-proof as some would believe it), it is big in terms of value.

Secondly, the fight for the biggest piece of the pie is seen as persistently `boring' year in, year out. It has always been Mercedes- Benz versus BMW. Audi and Volvo did try many times but failed to prise substantial portions away from these top two marques of the country of Karl-Heinze Rummenigge (What! Never heard of the football great from Bayern Munich? Okay, his senior, Franz Beckenbauer, is more well-known perhaps), but things may change in the near future, with the debut of a brand from Japan.

Coming back to the local luxury car segment, those 10,000 yearly units are vehicles distributed and sold by franchise holders like BMW Malaysia Sdn Bhd, Mercedes-Benz Malaysia Sdn Bhd and Euromobil Sdn Bhd. It excludes open approved permit (AP) holders like members of the Malay Vehicle Importers and Traders Association (Pekema), who normally trade used or reconditioned luxury vehicles. Include the Pekema members and we could well add up a few thousand units more to the overall sales number.

For the uninitiated, Japanese cars like Toyota Camry, Honda Accord, Nissan Cefiro and their Continental peers such as Peugeot 407 and Alfa 156 are not considered in the same segment, although their prices may well be over RM150,000 and most boast plush interior and considerable technology features too.

`Luxury cars are highly desirable and globally recognised cars accessible only to a very few financially-privileged people,' says an industry watcher.

Another observer stresses that luxury cars should have an aura of exclusivity and distinctive character and hence, project the social stature of whoever associated with it.

Ferrari distributor Naza Italia Sdn Bhd's Chief Executive Officer S M Faisal S M Nasimuddin says the luxury car market in Malaysia is experiencing strong growth. `There is always a strong demand for such niche market cars. Our existing automotive business has enabled us to build a significant relationship with the niche market, which demands access to high-quality automobiles,' Faisal says.

Expensive and expansive business

Luxury cars sold here cost anywhere from RM150,000 for a BMW MINI model to way over RM1 million at least, for the likes of models from Ferrari, Lamborghini and Maserati. So, it is a multi-billion- ringgit business. More expensive cars like Bentley, whose very few Malaysian owners are said to include royalty, cost a few million ringgit.

Indeed, there are big bucks to be made from the business. Take Mercedes- Benz Malaysia for example. The company formerly known as DaimlerChrysler Malaysia Sdn Bhd and the country's number one premium car trader for many years, had another successful year in 2007.

Its sales expanded 8% to 3,606 units from 3,327 units in 2006, to maintain its leadership position in the luxury segment despite a challenging year `clouded with an abundant element of surprises', the company said.

The `Three Pointed Star' vehicles sold by Mercedes-Benz Malaysia are priced from some RM250,000 onwards. If we put an average price of a Mercedes-Benz at RM500,000, then total sales should be a cool RM1.8 billion! That's merely sales volume. Add revenues from more lucrative after-sales services, including selling parts and accessories, and the overall turnover will definitely swell further.

BMW Group also had a good run in 2007 despite sales easing 3.9% over 2006's record level. It sold 3,300 vehicles in Malaysia last year to register a compounded growth of nearly 60% over the last four years.

BMW Malaysia Managing Director Wolfgang Schlimme told reporters recently that the German carmaker considers Malaysia a key growth market within the region.

Although Malaysia's luxury car market is small compared with Japan and China, Schlimme says BMW's concern is not only in selling vehicles but giving customers `the finer things in life'.

The BMW group is now working with local partner Sime Darby Bhd to relocate the production of certain BMW models to a new site in Kulim, Kedah, which is expected to be ready before the year-end.

The new facility will produce BMW 3 Series and 5 Series, work that has been undertaken at Sime Darby's assembling factory in Shah Alam for years. The facility is to be closed as part of Sime Darby's rationalisation of its auto operations.

Schlimme helped set up BMW in Malaysia in 2003, which also has the Rolls-Royce and MINI brands under its wing, with a current dealership network of 13 in various cities nationwide.

The 3 Series is the BMW group's best-selling model in Malaysia. A total of 1,523 units were registered in 2007, a 28% increase from 2006. `The BMW 3 Series has always been the leader in its segment in Malaysia and globally. Customers recognise the 3 Series as the premier choice in its segment, offering the highest level of technology, quality and design,' Schlimme says.