Sime Darby Takes Hold of Toyota in Malaysia. Is This A Good Thing for the Car-Buying Public?

Sime Darby is taking control of UMW in Malaysia to create an automotive goliath, in a merger deal that has been described as probably the largest merger deal in Malaysian history. But does this mean all change in the automotive sector in Malaysia? Well, maybe not. Both companies are presently controlled by Pemodalan Nasional Bhd (aka PNB) and so, in a way, this is just a consolidation of the two companies into a business unit that can enjoy further economies of scale.

The deal sees Sime Darby buying a 61.2% share in UMW for RM3.57 billion in cash (about USD790 million), valuing the company at RM5 per share (USD1.15). Thereafter, and once this is consolidated, Sime Darby will buy the remaining 38.8% under a general offering.

Sime Darby already controls a number of brands in Malaysia, including Porsche, BMW, Hyundai, Rolls Royce Land Rover and Ford, whilst UMW operates both Toyota and Perodua. Sime Darby to date has not been a large volume player in the Malaysian market, but that looks like it could be the major change in this deal.

In February alone of this year, UMW managed to deliver 34,233 vehicles and reported a 28% jump in sales for May. Sales at their Daihatsu/Toyota-rebranded subsidiary Perodua have been so good that the company was reporting a nine-month waiting list for some of their more popular models. Now, Sime Darby will be in control of almost 70% of the new car market in Malaysia, and that of course could be a major threat to the dealer networks and, of course, consumer choice.

Datuk Jeffri Salim Davidson, Sime Darby’s CEO, believes that the deal will cement Sime Darby as the leading automotive player in Malaysia and expects the deal to be finalised in about three months. He believes the move will allow the company to become more of a regional player in the automotive sector as they find ways to increase operational efficiency, enhance technological innovation and contribute to the electrification agenda that is apparently a global imperative.

The Malaysian government has been pushing for a New Industrial Master Plan 2030 which sees Malaysian companies, in particular those involved in the automotive sector, becoming greater regional player and Datuk Jeffri believes that the move is very much in alignment with that. Back home, though, it will leave a lot of us wondering if the reduction in competition is a good thing for us the consumer.