Malaysia’s tyre manufacturers are unable at the moment to meet the demands of the national automotive industry because of non-competitive raw material prices.
However, with the opening of a new synthetic rubber plant at the Refinery and Petrochemical Integrated Development (Rapid) corridor in Pengerang, Johor, they can expect to do so in five years. At the same time, the country can be optimistic of producing its own Malaysian brand tyres, said Malaysian Consortium of Rubber Products (Malcorp) chief executive officer Serajudin Ismail.
This follows the signing of a shareholders agreement between Petronas and Italian company Versalis SPA in November last year to produce all synthetic rubber at Rapid.
“With the setting up of Rapid, we hope synthetic rubber materials can be produced economically and to manufacture more tyres in Malaysia more competitively,” he said in a recent interview.
He said this was important, considering that tyre imports last year had exceeded RM1.7bil.
He added if there were no initiatives from now, tyre imports could balloon further to RM6bil a year by 2020.
Serajudin, who recently presented a paper on Solutions for Import Substitution on Rubber Automotive Parts at the Fourth National Rubber Economic Conference here, said Malaysia could not afford to “wait and see”.
He said the matter involved a high outflow of currency because of the huge volume of tyre imports.
On Malaysia’s ability to export rubber automotive parts despite not being competitive, he said the reasons included the Malaysian branding and attractive packaging.
Another reason concerns the issues of range and lead times, giving the example that in Thailand the competition lead time is 90 to 120 days and, in China, it is 90 days. In Malaysia, the lead time is between 60 and 90 days.
“Malaysia should improve lead time to be more available to global market and with extended range,” he said.
Serajudin said with Malaysia’s tyre production, the country could also export its products abroad, suggesting that to jumpstart exports and import substitution in the automotive sector, some agency should consider setting up a mould bank.
He said with such a bank, moulds can be borrowed by manufacturers to produce the required mould parts.
“This will make the parts more competitive since there will be no amortisation in this case,” he said.
Serajudin said having a mould bank could help the Government boost its exports of rubber automotive parts to over RM1bil, compared to only about RM400mil currently.
He said a mould bank had the role of being the producer of automotive rubber items and the funds channelled by the Government would enable the industry to use the mould without having to eke out specific allocations.
Malaysia’s tyre imports comprised new pneumatic tyres, rethreaded tyres, used pneumatic tyres, buffed tyres, solid tyres and others.
Serajudin said one reason for the high imports of tyres was that tyre manufacturers in Malaysia were themselves importers.
He said the other reasons concerned capacity issues and economy of scale in exporting countries.
Serajudin said what the industry needs, in essence, were more tyre plants and imposition of standards and product certification on various tyre-related products, including inner tubes.
On the Malaysian rubber products industry, in general, he said it had achieved spectacular growth in recent years, as seen in the rise of rubber consumption and export earnings from 2005 to last year.
While the rubber consumption was about 482,800 tonnes in 2005, the volume last year was more than 724, 000 tonnes.
Earnings from rubber products exports in 2005 were RM8.3bil while in 2013 the earnings exceeded RM14.6bil.
Serajudin said the growth, however, was dominated by the latex-based sector, in particular gloves manufacturing.
He said while exports of rubber products were expanding each year, imports were also growing.
In 2005, Malaysia’s imports of rubber products were worth RM1.9bil. Last year imports rose to RM4.6bil, with tyres topping the bill at RM1.5bil.