This article first appeared in The Edge Malaysia Weekly on November 7, 2022 - November 13, 2022
INOKOM Corp Sdn Bhd, a subsidiary of Sime Darby Bhd, is understood to be in talks with Chinese automaker Chery Automobile Co Ltd over contract assembly for the latter, sources say.
In an emailed response to a question on the possible tie-up with Chery, Sime Darby Motors managing director of assembly and strategic businesses Dennis Ho says, “We have been quite vocal in our ambitions to grow our high-value assembly business and, in our quest to be the preferred contract assembler for original equipment manufacturers (OEMs) in Asia-Pacific, we consistently engage with automakers to offer our expertise in high-value assembly. These discussions, however, are confidential in nature and we are not at liberty to disclose information on would-be partners.”
The Edge is given to understand that Chery has been looking to get the requisite approvals from the government for the initiative and is likely to receive the green light soon.
“They (Chery) have been talking to Mida (Malaysian Investment Development Authority) and I think Miti (Ministry of International Trade and Industry) as well … the talks are ongoing and I hear it’s been going well, and this plan could take off,” one source familiar with the matter says.
He adds that if the plans for assembly are targeting the Asean region, the move could have a significant impact on Inokom’s bottom line. However, issues with the National Automotive Policy may have to be ironed out before talks can progress, he says.
Another source who has heard of the negotiations between the two — Inokom and Chery — says it is likely that the assembly contract will be for the region.
“It only makes sense if it’s for the regional market … how many Chery cars could they be looking to sell in Malaysia? This year, we are looking at 630,000 vehicles being sold but more than 60% of those are Perodua and Proton, so the volume is not there … it has to be regional,” he says.
Chery officials could not be contacted for comment.
Sime Darby has a 51% direct stake in Inokom, and another 5% via its 51%-controlled Sime Darby Hyundai Sdn Bhd. Other shareholders of Inokom are Bermaz Auto Bhd (29% equity interest) and South Korea’s Hyundai Motor Co (15%). Bermaz, meanwhile, is the distributor and after-sales services provider for Mazda, Peugeot and Kia, and also distributes the Mazda marque in the Philippines.
At present, Inokom assembles BMW, MINI, Hyundai, Porsche and Mazda vehicles, among others. However, BMW and Mazda are said to make up the bulk of the assembly process.
For its financial year ended June 2021 (FY2021), Inokom posted after tax profit of RM23.94 million on the back of RM159.68 million in revenue. In FY2020, it registered after tax profit of RM22.47 million from RM166.97 million in revenue.
As at end-June last year, Inokom had total assets of RM211.99 million and total liabilities of RM37.16 million. Its retained earnings was RM74.82 million.
It is also understood that there are several renovations being undertaken at Inokom, which could be aimed at facilitating the assembly of Chery but details are scarce.
Nevertheless, Inokom’s new deal is unlikely to have much of an impact on Sime Darby’s bottom line. For the financial year ended June 2022, Sime Darby chalked up net profit of RM1.1 billion from RM42.5 billion in revenue. At its close of RM2.20 last Friday, Sime Darby had a market capitalisation of RM14.98 billion.
Sime Darby represents luxury marques such as BMW, Jaguar, Land Rover and Porsche and also has mass market brands, including Ford and Hyundai, under its belt. Furthermore, it has a huge presence in China, among others.
Other than auto, it has the Hastings Deering group, which is among the largest Caterpillar heavy equipment dealers worldwide.
Sime Darby came to control Inokom as part of a larger acquisition in 2005, when it took over 51% of Hyundai-Berjaya Corp Bhd (and triggered a general offer), 51% of Hyumal Motors Sdn Bhd and 51% of Inokom for RM956 million. Inokom alone was valued at RM76.5 million.
Chery exited Malaysia some 17 years ago after facing challenges as its models were not well received. Last month, however, news reports indicated that Chery was set to return to Malaysia, albeit with a partner and that its potential products were sport utility vehicles or SUVs — the Tiggo 4 Pro, Tiggo 7 Pro and Tiggo 8 Pro, among others.
Last year, Cherry sold 961,926 vehicles globally, a 31.7% year-on-year increase. The Wuhu, Anhui-headquartered company exported 269,154 vehicles in 2021, up 136.3% from the year before.
At end-September this year, Sime Darby inked a distribution agreement with BYD to distribute the latter’s electric cars, the ATTO 3 and the new e6 models.
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