Trump doing a Mahathir on Protectionism

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President elect Trump in a recent interview issued a warning that the country’s auto makers will have to pay a 35% tax on every car imported into the U.S. He added “When you walk down Fifth Avenue, everybody has a Mercedes-Benz parked in front of his house,” Trump said in an interview with The Times of London and German tabloid Bild. “How many Chevrolets do you see in Germany? Not many, maybe none, you don’t see anything at all over there. It’s a one-way street.” His action reminds me of our ex Prime Minister Mahathir Mohammad protecting Proton.

German’s response to Trump’s threat is what I think is needed going ahead. “If you want to move ahead, step up!”. Sigma Gabriel, Germany’s economy minister said that the US needs to build better cars as the American Car industry is getting worse, weaker and more expensive.  He also said the U.S. should focus on building more attractive auto models, rather than penalizing competition.

Looking at Malaysia, Proton has been protected for 34 years now. I still do not think Proton has grown to be a challenger in the Auto industry. In my opinion, protectionism is good in the early but complacency grows. No trade protectionism will help. Recently Mercedes announced that 9,047 Mercedes vehicles left showrooms in the first nine months of 2016, marking a 10% growth compared to the same period last year. The company’s total market share now stands at 2.4%, further solidifying its position as the #1 premium brand in the Malaysian automotive sector. I don’t think I need to remind everyone that the entry level for a Mercedes in Malaysia is about RM230,000 or USD51,000.

Trump has been trying to get U.S. auto makers such as Ford Motor Co. and General Motors Co. to shift manufacturing jobs from foreign plants back to the U.S. It is said that several car makers have shelved plans for new plants at Mexico, or said they would consider doing so in response to Trump’s threat of high border tariffs.

Daimler AG the maker of Mercedes-Benz cars, and BMW AG are among the German auto companies that have constructed plants in Mexico, with one eye on the U.S. market. Shares of Daimler fell 2% on Monday, while BMW’s stock 2.1% lower.