Volvo chooses Malaysia as Asean manufacturing hub

Carmaker Volvo, which operates under the company named Swedish Motor Assemblies Sdn Bhd (SMA) locally, has chosen to operate out of Malaysia instead and had recently consolidated its Asean operations to a single location here.

According to StarBizWeek, SMA’s managing director David Stenstrom said in a recent interview that Volvo, which had previously operated out of both Malaysia and Thailand, is now focused on scaling up assembly production locally instead and today exports Volvo cars to Thailand.

“We’ve had quite some challenging years especially until 2009 due to low volumes. We also questioned whether we should continue or not. We then decided to sell our Thailand plant and left there last year to consolidate all our volumes here in Malaysia which is a good decision for us. Now we have proper (sales) volumes to survive,” Stenstrom said.

SMA’s recent corporate restructuring to focus on its Malaysian operations is actually aimed at increasing its production levels locally which are expected to climb in tandem with the changing face of the company and bright economic prospects in this region.

“The business future looks extremely promising: this year we’ll likely produce 2,200 units, next year 3,000 units and three years from now we’re targetting 4,500 units per year. This includes the Malaysian, Thailand and Indonesia markets. Indonesia could be a good contributor moving forward,” he says.

The current assembly plant has a maximum capacity of 10,000 units and works on two shifts per day. SMA will gear up to produce more cars with the anticipated rise of demand for luxury cars in the region.

SMA presently assembles Volvo cars under the semi-knocked-down (SKD) basis with car bodies fully imported from Europe and thereafter assembled locally.

Moving forward, the company will soon see increased local production here and all its car models from the Malaysian plant will be sold as completely-knocked-down (CKD) units after it automates its assembly line and use more advanced technology.

“In the second quarter of next year I will install an ‘in-body-shop’ for all models because I need laser welding. I believe we will then be the first plant in Malaysia with laser welding. It’s quite advanced and even in Europe, so this will be a challenge for us to get the competence in the organisation and also to run it on a daily basis,” he says.

“After this, all cars from this plant will be of the CKD type. Taxes will be reduced for sure by about 20%, it costs from 30% to 10% if I have CKD and 20% is on the body pricing,” Stenstrom adds.

Stenstrom who gave the writer a tour of its assembly operations in Malaysia also says that 40% of the cars parts are sourced locally while the rest are imported, mostly from Europe. SMA currently rolls out the Volvo XC90, S80, XC60, S60 and V60 from the Shah Alam plant while it will start production of the V40 next year.

During the hour-long tour of the assembly plant, he showed and explained in detail every stage of the production line in the Volvo plant – from the arrival of the component to the final phases of assembly, which involves strict quality checking.

“I have separate teams for quality check because here, we place a lot of emphasis on producing quality cars.”

Stenstrom also highlights that the plant also contract assembles for other car companies which, like Volvo, focus on quality and safety of their final products.

However, he stresses that the selection process for contract assembly is done in a very strict manner and that production lines for Volvo cars and the contract assembly vehicles are strictly separated, including the personnel involved in assembling the contract assembly vehicles.

Stenstrom points out that despite the changing industry dynamics of the car industry with higher demand for aesthetically designed cars, the safety aspect has remained constant for Volvo and has become a part of its core competencies today.

“Safety is a culture and in the backbone of all Volvo employees. Whether you are in manufacturing or product development, safety is the first thing that you need to learn. For us, it’s so generic in everything we do. We probably have one of the most advanced crash centres in the world in Sweden where we do all these crash tests,” he says.

Stenstrom says SMA, which has been in the Malaysian market since 1967, is the first assembly plant in Malaysia. He adds that SMA plans to change the name of the company to a another name which reflects the identity of Volvo. SMA is a unit of the Volvo Car Corp.

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