IT is back to basics for the Naza group in the automotive sector. After abandoning its Kia and Peugeot franchise, the group’s automotive activity is once again anchored in its Mercedes-Benz franchise.
In addition to the Mercedes-Benz brand, the group is also the franchise holder of other high-end luxury models such as Ferrari and Maserati, as well as Ducatti motorcycles.
Compared to other premium brands, Mercedes-Benz is the only one with decent sales of 10,000 units or more per year. The Naza group is one of the top three retailers of the German-made luxury brand.
An additional advantage for the group is that it has developed a privileged relationship with the Mercedes-Benz principal in Germany.
According to industry officials, Mercedes-Benz Malaysia Sdn Bhd, which is a 100% subsidiary of Germany’s Daimler AG, ships the cars using the approved franchise permits (APs) of the Naza Group. The cars are then distributed to Cycle & Carriage Bintang Bhd and Hap Seng Group, which are the two main Mercedes-Benz model dealers in the country.
âAt present, Mercedes-Benz operations are the mainstay of the Naza group after relinquishing the Kia and Peugeot franchise. Almost all imported Mercedes-Benz vehicles arriving in the brand’s main country in Germany go through the Naza group, âexplains an automotive industry official.
âThe AP franchise business is not as lucrative as it used to be. Nevertheless, it still provides the group’s automotive business with a steady cash flow as Mercedes-Benz is a popular brand among luxury models in Malaysia, âadds the manager.
The relationship between the executives of Mercedes-Benz and the Naza group dates back to the 1990s when the late Tan Sri SM Nasimuddin SM Amin was at the head of the group. Nasimuddin built the group as an importer of new, reconditioned and used cars.
He then entered the local assembly of foreign cars, which led the group to invest in the construction of an assembly plant in Gurun, Kedah.
In the 1990s, when an AP was a highly sought-after document, the group was the âgo-to car dealershipâ for anyone wishing to import cars into Malaysia. By 2004, other bumiputera auto dealers had entered the PA industry and the government finally introduced franchise access points for dealerships who had established a special relationship with their directors overseas.
Besides the luxury car models, the Naza group is also the franchisee of the Suzuki brand, which caters to the demand of the mid-range. To that end, the executive chairman and CEO of the Naza group, SM Nasarudin SM Nasimuddin, announced earlier this month that the group will distribute Suzuki vehicles.
Suzuki, being a Japanese brand, has better traction compared to Kia, which comes from South Korea, and the Peugeot made in France. Japanese models are easier to maintain and historically have been better received in the domestic market compared to South Korean and European models.
However, for Suzuki to be a mainstream car, the prices have to be competitive. At the moment, Suzuki models are offered by gray importers and the prices are not competitive with the models of other brands in the same segment.
âThere are several non-national Japanese cars in the same segment that are selling for lower prices due to their (completely dismantled) CKD operations in the region. Unless Naza manufactures Suzuki cars locally, it will not be able to compete in terms of price, âsaid an official close to DRB-Hicom Bhd.
DRB-Hicom abandoned the Suzuki franchise five years ago and now has its hands full to manage the distribution of Proton cars, which is enjoying a resurgence thanks to its latest models.
The Naza group no longer controls the Gurun manufacturing plant – it was sold to the France-based PSA Group in 2018. The latter, which manufactures and distributes European brands such as Peugeot, CitroÃ«n and Opel, has a stake of 61 , 4% in manufacturing. factory, which positions itself as its regional manufacturing center.
The plant would operate below capacity and could accommodate production of Suzuki models. However, Groupe PSA may not wish to allow the plant to assemble competitive models.
Another area of ââthe automotive segment that the Naza Group is actively pursuing is the supply and maintenance of official government cars and police patrol vehicles. It was reported in January last year that a Naza-Berjaya joint venture had received a letter of intent to manage the fleet of government-owned vehicles.
The joint venture was to replace Spanco Sdn Bhd, whose 25-year concession ended in December 2018 and has been extended by six months since. It was also reported that Spanco had received an extension until June 2020, after which JV Naza-Berjaya would take over.
However, in February 2020, the government of Pakatan Harapan fell and there was no development on the fleet management contract.
Besides the automotive segment, the Naza group has broad interests in real estate development projects in Kuala Lumpur and lesser-known areas in Penang. But the real estate market has stagnated since 2017 and does not yet seem to have an impact on the group.