Sime Darby set to dominate Malaysia's car market

KUALA LUMPUR: Sime Darby Bhd is poised to dominate the entire automotive market spectrum following its acquisition of a stake in UMW Holdings Bhd (UMW Holdings).

According to a report from Berita Harian, Kenanga Research analyst, Wan Mustaqim Wan Ab Aziz, suggests that Sime Darby's foothold in the local automotive market will broaden, extending into the mid-market through the Toyota brand and the affordable market via Perusahaan Otomobil Kedua Sdn Bhd (PERODUA), in addition to its premium offerings.

This strategic position is expected to bolster Sime Darby's resilience against future fuel subsidy rationalizations. Moreover, the upcoming launches of Perodua's D66B and the Toyota Yaris Cross, expected by April, are anticipated to further benefit Sime Darby, according to Wan Mustaqim in a research note.

The takeover will elevate Sime Darby's market share from a mere 3% to over 50%, granting it access to Toyota's vast ecosystem, a robust high-value supply chain, and an enhanced presence in the local market. Geographically, Sime Darby’s market exposure will balance across Malaysia, China, and Australia, with the remainder in other markets, diversifying from its previous focus primarily on China.

UMW Holdings is set to be delisted from Bursa Malaysia this month, with the full cash acquisition of UMW Holdings, valued at RM5.8 billion, financed by a RM3 billion Sukuk Murabahah and proceeds from the sale of its healthcare business completed last December.

Post-integration, Sime Darby's debt and net gearing are expected to rise, prompting plans to reduce debt through the disposal of land in Malaysia's Lembah Wawasan in Labu, Negeri Sembilan, and lands owned by UMW Holdings in Komatsu and Serendah.

Wan Mustaqim has adjusted the net profit forecasts for the fiscal years 2024 and 2025, expecting an increase of 2% and 14% respectively, due to the enhanced revenue from acquiring UMW Holdings. This move not only signifies a major shift in the automotive landscape but also highlights Sime Darby's ambitious strategy to solidify its position across all market segments.

The decision by the conglomerate to divest from healthcare aligns with its strategic refocusing on core sectors, notably the automotive industry. Under Sime Darby Bhd, its subsidiary Sime Darby Motors has emerged as a significant player, representing an impressive array of brands across luxury, electric vehicles, and the mass market.

This encompasses a comprehensive range of services including sales, servicing, distribution, assembly, and rentals for esteemed brands such as Jaguar, Porsche, BMW, Audi, Volvo, Mazda, Ford, Kia, and BYD.

Sime Darby Motors not only operates the Inokom assembly facility in Kedah, Malaysia, which assembles vehicles for BMW, Hyundai Motor, Kia, Mazda, Chery, and Mini but also stands as the exclusive local distributor for major names like BMW, Ford, Land Rover, and Jaguar.

Moreover, it boasts exclusive distribution rights for BMW, Mini, Rolls-Royce, and Suzuki vehicles in both Hong Kong and Macau, highlighting its pivotal role in the automotive landscape.

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