Malaysia's motorcycle maker eyes expansion in SE Asia

Malaysia's motorcycle maker eyes expansion in SE Asia

Agence France-Presse, Kuala Lumpur

National motorcycle maker Modenas said on Monday it would
assemble Malaysia's first superbike as it prepares to expand
exports to Southeast Asia to tap the opening of regional markets.

Motosikal Dan Enjin Nasional Sdn. Bhd. (Modenas) signed a pact
with the technical arm of national oil firm Petronas to assemble
75 of the 899cc superbikes.

First unveiled in June last year, it was developed by Sauber
Petronas Engineering to debut in the 2003 World Superbike
Championship in Valencia, Spain in March, Petronas said in a
statement.

To compete in the full championship, Petronas has to
manufacture 150 of the superbikes by July.

It has already built 75 in Europe and asked Modenas to build
the rest in a tie-up aimed at transferring technology and skills,
Petronas said.

Modenas officials said the alliance was a boost to its long-
term plan to diversify products and expand exports to Southeast
Asia where some five million motorcycles are sold each year.

Deputy general manager Chang Leong Hao said the Malaysian
motorcycle market has "reached a peak" as rising affluence leads
more people to buy cars.

With the lowering of import tariffs under the Association of
Southeast Asian Nations (ASEAN) Free Trade Area (AFTA), he said
Modenas would launch two new models this year to boost exports,
especially to top market Indonesia.

It launched a scooter earlier this year and hopes to
eventually produce superbikes following the Petronas tie-up,
officials said.

"The market here is small and stagnant. We are going into
Indonesia quite strongly, as well as Vietnam and Cambodia, where
income is still low and sales are growing. Our next target is
Thailand," Chang told AFP.

Under AFTA, import tariffs in key ASEAN markets are cut to
below five percent this year but Malaysia has delayed opening its
auto market until 2005.

Modenas, which tied-up with Japanese maker Kawasaki to begin
production in 1997, currently exports less than 10 percent of
some 100,000 units produced annually to the region, as well as
Iran, Turkey and Greece.

Chang said Modenas domestic sales hit 400 million ringgit
(US$105 million) last year to remain market leader with a 40
percent share, ahead of world's top motorcycle maker Honda.

It is maintaining a sales target of 100,000 units this year,
he said.

Modenas, which has invested close to 400 million ringgit in
its plant in Gurun in northern Kedah state, is aggressively
reducing production costs to stay competitive for AFTA, he said.

It aims to raise production in its plant, which can produce
200,000 units a year but is currently running only at half
capacity, he added.

Modenas is facing pressure from Honda, which has developed new
and cheaper models with components and parts made in China.

Officials said the Petronas superbikes were expected to be
sold commercially later this year, priced at around 100,000
ringgit each, and production may continue depending on demand.