The cost to locally-assemble (CKD) a new model have tripled in the last 10 years, says Kia distributor Dinamikjaya Motors, whose parent company Bermaz Auto holds 33.3 percent of Kia Malaysia, the manufacturing arm of the Korean marque here.

While Kia Malaysia and Bermaz Auto declined to reveal the amount invested into local manufacturing, we understand that it is a low-mid range 8-digit sum, in Ringgit.

Speaking at a press conference yesterday, Executive Chairman Dato' Sri Ben Yeoh explained that that investments into CKD are usually split into two portions – one specific only to the model produced, and another for the plant’s general-use areas and upgrade.

Investments into tools specific to the vehicle model - jigs, welding guns, carriers to hoist engines and doors - will be borne by Kia.

Investments into general use equipment like assembly lines, hangers, rails, and paint shops will be borne by Bermaz Auto, and these will cost another 8-digit Ringgit sum.

Yeoh also added that the cost used to be three times lower, but increase in material cost and complexity of today’s cars have pushed prices up.

“For example if you look at the cost of a specific spot welding gun. If you use normal cold roll (steel), [it’s a] different specification for those spot welding guns. If you use high tensile steel, it’s another specification. So different guns have different investment cost. As we go into new technology, new use of materials, the cost of investment increase. So in the future, we have different materials, for example aluminum, and then we have composite materials. So these will entail different assembly and manufacturing methods, that will require different levels of investment altogether. Some are carried over, some are not.”

Yeoh also explained that many in plants in Malaysia are operating below their optimal efficiency, so investing into a new plant to build Kia cars would not be wise.

For Bermaz Auto, which also owns 30 percent of the Inokom contract manufacturing plant in Kulim that now makes cars for BMW, Porsche, Hyundai, Kia, Mazda, and several other Chinese commercial trucks, the solution to increase efficiency is to remodel the Inokom facility following a plant-within-a-plant concept.

“Don’t create new investments when there are already sunk investments that are not fully utilized,” said Yeoh.

“Similarly when we have the Kia joint venture, we told Kia – with greenfield (new plant built on a new site), you will definitely be able to get government approval. There’s no issue for establishment of green field assembly plants, but why would you want to do that?

“Physically, it’s because there are resources available and you don’t have to invest in greenfield operations, and it takes time. And your initial production volume is small, but when the production volume goes up there are a lot of land within Inokom itself that you can actually request.

“For example, for Mazda we have a plant-within-a-plant, and because there are now new requirements (from Mazda), Inokom has reinvested in a new paint shop. The new paint shop has exceeded everybody’s expectations – from a period of time when it was very dull, to now it is going to maximize capacity, and going above its installed capacity and we have now a new paint shop coming onstream.”

“If you were to start from greenfield, there is always the human resource issue. Today, in Malaysia we have labour shortage. So it’s either automation, and automation for the small volume production would not be quite sensible, and you need to have a mix of talent and labour resources, we need time to train and educate.

“So this system of contracting and at the same time upgrading the technical expertise within the manufacturing environment in Inokom is good, because then they have exposure to European (BMW and Porsche), which are very luxurious vehicles, to Japanese (Mazda), and now Korean (Kia) technology. So different levels of compliance, manufacturing technology. It is an educational process, and it is a win-win situation for all.”

The 2022 Kia Carnival (KA4) is the first Kia model to be assembled at Inokom. Available in either 7- or 8-seater configuration, the 2.2-litre turbodiesel 8-speed automatic minivan is priced from RM 231,428 to RM 261,228.

Following this, the 2022 Kia Sorento (QM4) will be the next CKD model for Kia in Malaysia, probably by end-2022 or early-2023.

The Kia Malaysia plant in Inokom has an annual production capacity of 8,000 units per year.

Also read: CKD Kia Sorento (MQ4) confirmed for Malaysia - Coming in 2023?