Perodua Plans To Spend RM10 Billion In 2023 With Local Vendors
Perodua is projecting to spend about RM10 billion this year with its local vendors as it continues to maximise local content. This is partly due to its plan to maximise its production in 2023 to 330,000 vehicles to meet demand. The company’s sales projection for 2023 is 314,000 vehicles, which factors in outstanding orders carried forward from last year as well as continued demand this year for existing and expected new models, one of which is the all-new Axia.
Last year, Perodua spent RM8.3 billion on locally sourced components, a 57% increase from 2021’s RM5.3 billion as economic activities restarted after the lockdown disruptions. 2023’s forecasted spend with local vendors will be a 21% jump over last year’s. Perodua’s current rate of local content for its vehicle line-up is 95%.
According to Perodua President and Chief Executive Officer Dato’ Sri Zainal Abidin Ahmad, the annual capacity of both its manufacturing plants under Perodua Manufacturing and Perodua Global Manufacturing is 320,000 vehicles on a 2-shift cycle, but the company is working to optimise plant operations through improved productivity by improving line allocation, vendor management and overtime.
“This purchase commitment is expected to further encourage the Malaysian automotive ecosystem to further improve its production capabilities and quality standards,” said Dato’ Sri Zainal. The increase in its local purchasing would help Perodua better manage its costs as well as provide the local vendors with better economies of scale to better compete with their counterparts abroad.
Moreover, its sales expectations of 314,000 vehicles for this year is an 11% increase over its 2022 achievement of 282,000 vehicles, which was beyond its own forecast of 247,800. The increase in demand for Perodua vehicles is mainly spurred by the government’s Penjana economic initiative which waived sales tax on new locally assembled vehicles. It also opined that the local TIV (total industry volume) can go beyond 650,000 vehicles forecasted by the Malaysia Automotive Association; the company predicts a potential TIV of 700,000 vehicles.
“This year (2023) provides a golden opportunity for us as consumers still have confidence in the automotive market. In fact, more than half of our targeted volume is from bookings we collected last year but have yet to deliver,” Dato’ Sri Zainal commented.
Additionally, to match its production and sales growth, Perodua has allocated RM1.15 billion for capital expenditure in 2023 for expansion and operational improvements. One of the key areas is its new business division to expand its Pre-Owned Vehicle (POV) and Subscription business, especially after the positive response from the public post Ativa Hybrid launch in September 2022.
Approximately RM537.1 million of this budget is allocated for new model development (which includes development and preparation for electrified models), while RM247.1 million will be spent to further modernise operations, including the upgrading of existing 1S and 2S centres into 3S centres, and a renewal of outlet design.
“It is Perodua’s intention to grow with our partners and we want to do this (expansion) in a way that would be mutually beneficial and sustainable,” Dato’ Sri Zainal said. He said that with the improvements planned for its network, Perodua is targeting an increase in its vehicle intake at its service centres to 2.8 million vehicles, up from 2.6 million vehicles last year. This growth would be aided by a combination of improved service time as well as an increased number of service bays nationwide.
Furthermore, Dato’ Sri Zainal assured that the company is working to manage and contain production and operational costs so as to avoid raising retail prices this year for its current models. And while the Penjana sales tax exemption will end in March 2023, the company will do its best to absorb this cost for vehicles booked earlier but delivered after the March deadline.