Perodua: Digitized vendor processes is how the Alza's prices remained low despite rising raw material cost
Hans · Aug 16, 2022 09:42 AM
The partnership between Perodua and Malaysian Investment Development Authority (MIDA) to help local automotive parts vendors digitize their work processes is now yielding benefits in the form of improved efficiency, which in turn allows vendors to be more resilient in this volatile period of rising raw materials cost, said Perodua.
Speaking at the launch of the MIDA-Perodua Digital Transformation Ecosystem Programme yesterday, President and CEO Dato’ Sri Zainal Abidin Ahmad said “The MIDA-Perodua digital ecosystem project has already made an impact with the first three companies mentioned earlier (LSF Technology, J.K Wire Harness, Autoliv Hirotako) who were in the pilot project back in 2020, and has already seen improvements in their operations.”
He added, “The support given by MIDA is crucial as this programme nullify any need for financing cost that will ultimately be passed to end customers, while at the same time helped manage the impact of higher prices of goods. We are facing a very difficult situation right now. The increase in raw material prices for example, has been tremendous – steel price, plastic materials, and all that – however rest assured for the rest of this year, we are not going to pass the increase in prices to customers.
“Perodua will absorb any price increase, and how we manage this is between us and the vendors. Some of the vendors we also need to support them, support in the sense that we have to make sure they will be able to survive in their business and continue to supply to us. So as a responsible national car company, it is our working vision to ensure that all of our vendors who participated in this programme, or in fact participated within the Perodua supply chain system, will be supported and will be helped by Perodua eventually.”
Perodua had in January said that steel prices had increased by 20 percent in 2021, and a further 10 percent increase is to be expected for the rest of 2022. However, the company firmly said that it will not pass the increase in cost to customers.
This is not easy and rivals like Proton have already announced increased in prices, higher than pre-SST exemption prices.
Due to the relatively smaller scale of our local manufacturing industry, many local parts vendors are still using labour intensive, manual processes, and don’t have much bandwidth to absorb increase in raw material prices.
The MIDA-Perodua digital transformation project aims to push these vendors to adopt more efficient automated and digitized processes.
Some vendors have now put in place Internet-enabled Industry 4.0 processes into their plants, with one vendor even developing image recognition AI-based processes into its plant.
Although this project is initiated between Perodua and MIDA, vendors are free to share these know-how gained to do more work for their other clients, including Proton, Toyota, and Honda – the other big names with local manufacturing presence here.
The rationale is that Perodua needs vendors to thrive so it can procure more locally made parts from them but it is not realistic to expect vendors to thrive by having them relying exclusively on Perodua’s business contract alone.
The vendor transformation programme will run in parallel with Perodua’s internal Transformation 3.0 initiative, also known as the Perodua Smart Build project, which aims to make Perodua a self-sufficient R&D centre, contributing as a regional product development hub for Daihatsu and Toyota.
Perodua's most recent launch is the 2022 Perodua Alza, which despite offering a lot more features than before - lower fuel consumption CVT transmission, 6 airbags, autonomous emergency braking, lane departure warning and prevention, electronic stability control, LED headlamps, rear A/C vents - as standard, prices have actually dropped!
The previous generation Alza, which never had these features, was priced at RM 62,690 (with SST) for the highest specifications 1.5 AV variant. Now, the cheapest Alza 1.5 X variant is priced at RM 62,500.
Of course, the previous Alza started at a much lower RM 51,490 price, but that's not a fair comparison as the new generation Alza now comes with the aforementioned safety features as standard.
The company is already showing results by developing the D92A 2023 Toyota Vios. The model is exclusively for Toyota and will not be sold by Perodua, though the Vios’ hatchback twin the Yaris will also be sold as a Perodua Myvi.