Post-takeover of UMW by Sime Darby, Toyota Hilux and Ford Ranger to be frienemies under one group

Following yesterday’s announcement by Sime Darby Berhad to acquire 61.2 percent of UMW Holdings for RM 3.57 billion, it’s still business as usual at UMW Toyota Motor (and Perodua) this morning, but there is clearly a sense of uncertainty among employees.

UMW has yet to make any announcement on the matter, so the obvious questions on whether Daihatsu and Toyota were consulted on the deal, cannot be answered yet.

The fact that UMW Toyota and Perodua – which are known for their very close engagement with the motoring press – have yet to issue a press statement on the matter even though the takeover clearly affects the future of their brands, suggests that even they themselves don’t have all the answers yet.

Meanwhile, in a press conference with business media (without the motoring press) yesterday, Sime Darby Group CEO Dato’ Jeffri Salim Davidson told The Edge that details have yet to be ironed out with UMW, adding that the acquisition announcement is more of an “engagement ceremony” between the two parties.

“We haven’t had a chance to really do much yet or talk to them (UMW) but there will be some divestment, some rationalisation, some synergy opportunities. But we don’t really know what they are yet,” he said.

Normally, manufacturers are very sensitive about their distributors’ conflict of interest when they are involved with multiple brands. It is one thing to have multi-brand dealerships, but things are a little bit different when you’re the distributor / national sales company, and there are quite a few overlapping interests between Sime Darby Motor’s distributorship business in Malaysia and UMW Holdings’.

This concern is most evident in the pick-up truck segment.

The Toyota Hilux is UMW Toyota Motor’s second most important sales volume contributor after the Toyota Vios. The Hilux is a nameplate that has been honed for several decades and it has held on to its No.1 position in its segment since the mid-2000s.

In the first six months of 2023, UMWT sold nearly 13,000 units of the Toyota Hilux. So dominant is the Toyota Hilux that you can combine sales numbers of the second- and third-placed ranking models, the Isuzu D-Max and Mitsubishi Triton, the figures still won’t match the Toyota Hilux’s.

Meanwhile Sime Darby AutoConnexion’s (SDAC) Ford business in Malaysia is kept afloat by just one model – the Ford Ranger. SDAC also sells the Ford Everest but with prices starting at RM 263,888, it’s not going to bother the Toyota Fortuner, which starts from RM 189,880.

If the Ranger doesn’t pull its weight, Ford will cease to exist Malaysia.

Yes, the Ranger also has a rally-bred high performance Raptor variant, which attracts a very different group of customers from the Hilux, but the bulk of the Ranger’s sales come from the lower range XL, XLT, and XLT+ variants, and SDAC’s goal is to wrestle sales away from UMWT’s Toyota Hilux.

To put it simply, the Ford Ranger and Toyota Hilux cannot be friends, let alone under the same holding company.

Putting aside its dealership business (Auto Bavaria and Sime Darby Swedish Auto), Ford is the biggest volume contributor to Sime Darby Motors' vehicle distribution business in Malaysia, selling over 4,000 units in the first half of 2023. 

In other words, the Ford Ranger is equally important to Sime Darby Motors as the Toyota Hilux is to UMW Toyota Motor.

For a harmonious ‘marriage,’ both Sime Darby and UMW will need to assure their respective partners, Ford and Toyota (and maybe Daihatsu too), that there will be enough separation and autonomy between the respective brands' teams.

There’s also overlap between UMW Toyota Motor’s Lexus marque and BMW. Sime Darby holds 49 percent of BMW Group Malaysia.

Lexus Malaysia's best selling models is the Lexus NX, followed by the Lexus ES. Both models go up against the BMW 5 Series and X3 respectively. However, BMW sells 10x as many cars as Lexus, because of the latter's imported cars-only (CBU) line-up. Between Lexus and BMW, it's obvious which brand will have to yield.

Still, it’s not impossible for a distributor to represent multiple brands with overlapping products.

Bermaz Auto is a darling among local investors and its proven reputation in turning down in the dumps brands into high fliers have made Bermaz the go-to distributor for any brand looking to set up shop here.

Bermaz is responsible for Mazda, Peugeot, and Kia in Malaysia. All three brands have a very SUV-heavy product line-up, all with overlapping prices, but the principals are fine with Bermaz Auto’s multi-brand arrangement.

But we also need to put things in context. When Peugeot and Kia established business relationships with Bermaz, they weren’t doing it from a position of power. In fact, Bermaz did for Peugeot and Kia what their previous distributor Naza couldn’t. In a way, Bermaz is doing them a favour.

DRB-Hicom is another example of a congolomerate with overlapping brands interest. DRB is the local partner for both Mitsubishi Motors (MMM) and Isuzu Malaysia (IM). However, MMM and IM are run by Japanese managers from Mitsubishi Corporation, which owns both Mitsubishi Motors and Isuzu Motors, so to the manufacturer, this not a concern.

With Toyota / Daihatsu and UMW / Sime Darby, the power dynamics are very different as their distributorship (Toyota and Lexus) and technical partnership (Perodua) agreements are with UMW Holdings, which don't have other automotive brands.

During Sime Darby’s briefing to investors and the business press yesterday, “Entry into Toyota ecosystem” was singled out as one of the 5 main strategic rationales for acquiring UMW.

By takingover UMW, Sime Darby is expressing its interest to work with Toyota but the question is, does Toyota share the same opinion? Both Toyota and its compact car subsidiary Daihatsu haven't said anything on the matter.

Sime Darby intends to acquire the remaining 38.8 percent of UMW Holdings via a Mandatory General Offer (MGO) by November 2023.

The takeover should be completed by February 2024, after which UMW will be delisted from Bursa Malaysia.

With this, DRB-Hicom (Proton, Smart, Honda, Mitsubishi, VW, Audi) will become the only other government-linked conglomerate left in the local automotive industry.