KUALA LUMPUR (Oct 16): A local assembly operation by Chinese carmaker BYD will offer incremental upside to Sime Darby Bhd (KL:SIME) which controls the plant, an analyst said.
The appointment of Inokom Corporation Sdn Bhd, a 54%-owned subsidiary, will free Sime Darby from the 10,000-unit local sales volume cap, CGS International said in a note. Higher production volumes could also improve economies of scale at Inokom, the house noted.
“While still pending further clarity on production volumes secured by BYD with Inokom, we view the pivot to contract assembly as positive for Sime Darby,” CGS International said.
On Thursday, BYD announced Inokom Corporation Sdn Bhd as its local assembly partner for completely knocked-down vehicles at its Kulim plant. Sime Darby is also the official distributor of BYD vehicles in Malaysia from 2022.
Inokom — also partly owned by South Korea’s Hyundai Motor Company and Bermaz Auto Bhd (KL:BAUTO) that assembles Mazda-branded vehicles — could produce up to 80,000 units per year, with utilisation rate of 80%.
The previous plan was for an assembly plant in Tanjung Malim, Perak, targeted to produce up to 50,000 units a year. However, the facility was subject to a requirement capping domestic sales at 10,000 units, with the remaining 40,000 units earmarked for exports.
Apart from being freed from the limit, BYD also benefits from tax exemption for locally-assembled electric vehicles until 2027, which CGS International said has the potential for an extension given the government’s focus on promoting local assembly.
BYD currently offers seven models in Malaysia, though assembly details have yet to be announced.
Completely-knocked-down electric vehicles are also not subjected to requirements for minimum cost, insurance and freight value of RM200,000 and 180-kilowatt minimum output that apply to their fully-imported counterparts.
That should support the sustainability and competitiveness of Sime Darby’s BYD distribution business in Malaysia, CGS International added.