This article first appeared in The Edge Malaysia Weekly on July 17, 2023 - July 23, 2023

IN 1996, Yeap Swee Chuan founded the company that would eventually grow to become the largest auto parts manufacturer on the Stock Exchange of Thailand (SET), Aapico Hitech pcl.

But his journey was a bumpy one. Between 1985 and 1996, his Ford car distributorship in Thailand was loss-making and had racked up total debts of about RM30 million. Because of this, when the Asian financial crisis (AFC) hit in 1997, he was forced to remain in the country to fulfil his financial obligations.

“[In the late 1990s] was the ‘Tom Yam Kung Crisis’. I did not come back [to Malaysia], but all my partners did. Because we had lost so much money my partners said, ‘You better don’t come home, try to pay your debts and come home’,” he recalls in an interview with The Edge.

Yeap, who is now president and CEO of Aapico Hitech, started his business journey in Malaysia in the 1980s with a Mitsubishi car dealership before the Japanese carmaker formed a joint venture (JV) with Perusahaan Otomobil Nasional Sdn Bhd (Proton).

Yeap, who was about 30 years old at the time, became a Proton dealer following that.

“Then there was an economic crisis in Malaysia [in 1985]. Some friends saw that Ford was doing well in Malaysia, so we went to Thailand to look for a Ford distributorship there. That was in 1985. But it was a big mistake,” the 75-year-old recalls.

Apart from the RM30 million in debts, Yeap says the distributorship lost its entire RM20 million paid-up capital after 10 years of operations.

When the AFC occurred in 1997, the Thai government abolished the local ownership requirement on foreign-invested projects, and subsequently abandoned the local content requirement in 2000.

The major policy shift in the late 1990s attracted a variety of global carmakers to invest in Thailand, including Auto Alliance (Thailand) Co Ltd — a JV between Ford and Mazda.

Keen to survive and repay his debts, Yeap had sold his Proton dealership in Malaysia to finance the construction of an auto parts factory in Ayutthaya in 1996. Its first contract was to manufacture body parts and fuel tanks for Ford.

While Aapico Hitech is thriving in Thailand, its success stands in stark contrast to the situation in Malaysia, where protectionist policies and an obsession with the development of a national car have hindered progress and stifled competition.

Post-AFC, the focus on protectionism has resulted in limited progress in the Malaysian automotive sector, perpetuating an environment prone to rent-seeking.

In contrast, riding the automotive industry boom in Thailand, Yeap listed Aapico on SET in 2002, and grew it into a Tier-1 parts supplier to carmakers globally, such as Toyota, Isuzu, Honda, Nissan, Ford and Mitsubishi.

Earlier this year, Yeap returned to form a JV with German exhaust specialist Purem in Malaysia. The JV, Purem Aapico Sdn Bhd, is 49% held by Aapico and 51% by Purem. It has made an initial investment of RM30 million and targets to produce exhaust systems for supply to Proton this year.

Last month, Aapico paid RM41 million to acquire a 60% stake in Advanced Vehicle Engineering Global Sdn Bhd, an auto parts unit of Proton. It has committed to an initial investment of RM40 million for expansion as demand for Proton vehicles grows.

While it has been Yeap’s aspiration to reinvest in Malaysia, he admits that the current round of investment is also driven by sound business decisions, particularly after Geely’s entry into Proton in 2019.

“In the past, the industry was not so strong. But with Geely coming in, they are thinking of producing 400,000 units in Proton City. So, there is opportunity [in terms of] volume,” he says.

Prior to this, Aapico had already expanded from Thailand to China and Portugal, with a total workforce of over 5,000.

In contrast to Thailand’s open-door policy in the automotive sector, Malaysia’s protectionism-driven approach has created a sheltered environment for local players, hindering the nation’s ability to keep pace with regional competitors. The focus on developing a national car, while noble in its intentions, has led to a disproportionate allocation of resources and a lack of diversification within the automotive industry.

Apart from public policy reforms, Yeap attributes the success of Thailand’s automotive industry to its export-oriented approach. “[Producing] cars for your own country is easy; if there is a recall, it is only one country. But Thai cars are [exported] to over 100 countries, the quality standards are very high for the industry, so the whole industry has [developed] the mentality over the years.

“Initially, nobody believed it could be done, people thought it was a joke. But the industry kept trying and reached that level. Thailand needs an external market. The country produces two million cars a year, one million each for the local market and export. Many cars are exported here [Malaysia].”

Yeap acknowledges the importance of diversifying Aapico’s operations to more countries, after experiencing several hiccups — such as flooding and geopolitical uncertainties in recent years — to ensure the sustainability of its business growth. “You must be global because your customers are all over the world. So, the more global you are, the more chances you [have of] getting the whole world’s products.”

He believes Aapico is well positioned to tap the energy transition trend, as most of the group’s products are applicable to electric vehicles (EVs).

“Some 95% of our parts are not engine-related, such as the body and suspension. Even the frame we produce for Isuzu is still the same, except when you need to accommodate the EV battery, [then] the cross member is replaced by the EV support frame. So Aapico is also designing an EV support frame.

“We don’t have many engine parts, maybe 5%, so strategy-wise, we are comfortable. And our customers are not concentrated on one OEM [original equipment manufacturer], like Toyota. Our customers are the whole world. That is our business,” he says.

As part of Aapico’s succession planning, Yeap’s daughters Xin Rhu and Xin Yi are in the management team.

According to Aapico’s latest annual report, 2022 was a record year for the group, with net profit rising 78% to an all-time high of THB1.82 billion (RM241 million), from THB1.02 billion in 2021. Revenue grew 35% to THB28.35 billion from THB20.97 billion.

Yeap’s success story in Thailand demonstrates the potential benefits of an open and pro-business environment, which can be the catalyst for success in the automotive industry and beyond. 

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