What kinds of growth has Giga Shipping seen since 2001?
D'SILVA: Since its inception in 2001, we could measure Giga Shipping’s growth financially, which has been about ten-fold in the past 13 years. We started out the company with about MYR1m ($310,000) and the shareholder’s funds exceed MYR100m ($31m) today. The measure should not be looked at strictly from a financial point of view. We have built a company that is providing services to Sabah and Sarawak and one that handles the entire chain of logistics for the automotive industry.
Today, we can deliver vehicles throughout Peninsular Malaysia, and throughout Sabah and Sarawak through our specialized trucks. We actually own the largest fleet of trucks in the country. We also have customs and forwarding agency licenses and provide the same service to our automotive clients. The third piece of the chain is the car terminals. We have three car terminals; one at Westport, which occupies 55 acres, and another two in Sabah and Sarawak, in Kota Kinabalu and Kuching respectively. These car terminals serve as storage and distribution yards for cars. So if you take all of this into consideration, the entire logistics chain together with the financial growth, you will see that Giga Shipping has actually grown by leaps and bounds.
What are your future growth projections?
D'SILVA: Growth in our industry basically comes from two areas. One is the natural growth of the automotive sector and the other is from the incentives the government puts in to develop the automotive industry. These are not just incentives to increase the sale of cars, but incentives to build up the supply chain in the automotive industry. So as the government puts in incentives, we as logistics providers will also see growth in our industry.
How can Malaysia be regionally competitive in the automotive industry?
D'SILVA: The Malaysian automotive industry is basically a domestic business. Even now, this is very much a protected industry. So whatever is being produced locally, a very large amount, almost all even, is consumed domestically. In that sense, it is not really easy to compare us to Thailand or other ASEAN nations who have designed their automotive industries for the export market worldwide. Having said that, I think there are steps being taken by the government to open up this market and local manufacturers are working towards designing vehicles meant for export.
How have partnerships played a role in the growth and development of the group?
D'SILVA: When we started Giga Shipping, within a year, we found our two Japanese partners, Nippon Yusen Kaisha (NYK) and Exeno Yamamizu. We choose our partners very carefully. These are two Japanese partners who are recognized in the logistics industry with NYK being one of the leaders in the automotive logistics industry. The contribution from our partners is from their expertise, their design, and their knowledge. So that is how we have set up our regional office here in Malaysia; around that model.
Secondly, we provide services not only domestically, but also regionally. Our vessels trade all over the ASEAN waters to ports in Thailand, Jakarta, Singapore, and Brunei, which is meant to distribute vehicles that are being exported out of Thailand for the region. So our partners have been contributing cargo from those ports. We cannot only look at the Malaysian domestic market and provide services within this market. So our chain of services includes importation of vehicles from Thailand, Indonesia, and Singapore. So that is where our partners have assisted in our business.
Our partners have also assisted in helping us open doors with the car manufacturers. They provide their logistics services to basically all of the big carmakers all over the world. So whenever we require some introductions or assistance with the big car makers, whether it is Toyota, or Nissan, or Volkswagen, they are always there to assist us.
What are your regional growth plans and initiatives?
D'SILVA: At the moment, regional growth is not as exciting as we had anticipated it would be when we started this business. Many years ago, 7-8 years ago, there were plans to design an ASEAN automotive hub, and that is how Thailand and Indonesia actually started. The whole design was to produce cars for the world. Unfortunately, Malaysia held back some of their plans.
Malaysia imports about 5,000 cars a month from ASEAN. In light of all of these vehicles that are coming in, there is no reciprocal number of cars being exported to our ASEAN neighbors. So that plan or dream that we had has not yet been achieved. But eventually I think the country will get there.
Unfortunately, vehicles are primarily coming into Malaysia. Malaysia imports about 5,000 cars a month from ASEAN. In light of all of these vehicles that are coming in, there is no reciprocal number of cars being exported to our ASEAN neighbors. So that plan or dream that we had has not yet been achieved. But eventually I think the country will get there. We will have to develop our automotive industry and to agree to the terms that have been set between the governments when this ASEAN automotive policy was drawn up.
What role does Straits Auto Logistics play in the overall group?
D'SILVA: Straits Auto Logistics is the ship owning arm of the overall group. Straits Auto Logistics currently owns two RoRo vessels; RoRo stands for roll-on-roll-off. These are specialized vehicle carriers. One of them can accommodate 3,850 cars and the other vessel can accommodate 5,340 cars. These vessels travel through ASEAN on a fixed route and a fixed schedule into the ASEAN ports and the Malaysian domestic ports. The vessels travel between the ports and Straits Auto Logistics charges the space out to Giga Shipping, NYK, and also K-Line to book their vehicles on the vessels. Quite recently, we have also acquired our third RoRo vessel. The vessel has a capacity of 5,100 units. So we are going to have 3 vessels on the same route.
What kind of investment are you making into the new vessel?
D'SILVA: The third vessel will cost us in excess of MYR40m ($12.4m). This vessel was owned by K-Line and K-Line has agreed to sell us this vessel because within ASEAN, we have a very close booking relationship with them. Giga Shipping also acts as a booking agent or charters cargo onto K-Line’s vessels, which are trading around this region. So when we were in need of a vessel this size, and K-Line had a suitably sized vessel, they spoke to us and asked if we were interested to purchase it and we agreed.
Logistically, how do you work with carmakers?
D'SILVA: To get the schedules fixed, we have to discuss with car makers because car makers have fixed production and fixed times to export their vehicles. This applies to Malaysian domestic carmakers as well as the foreign ones. So this discussion is currently underway, and once it is done, there will be fixed day port calls, for example, every Tuesday at Laem Chabang, and every Thursday at Port Klang, and every Friday in Jakarta, and so on and so forth.
What challenges do automotive shippers face in Malaysia today?
D'SILVA: The biggest challenge to the automotive industry is the demands of the car makers themselves. We are dealing with expensive commodities and it is not like dealing with bricks and mortar and other commodities. As time goes by, cars do not get any cheaper and they get more sophisticated with different types of electronics. Different car makers come out with their own electronics. They all want zero defects these days. So what we have to do is continue to re-educate ourselves about what car makers want. We have to train our staff to handle every new model that comes out and every new gadget that comes with vehicles. Most importantly, our distribution has to be zero defects. We distribute hundreds of thousands of cars and our target still remains zero defects. Zero defects boils down to not even a mere scratch. Scratches are not allowed and you cannot sell a car that has been dented or scratched no matter how small it is. So that is our greatest challenge. How we overcome it is to train our staff and by spending time with our customers to understand their changes and the new stuff they are introducing to the market and their new policies. So we very quickly have to adapt and change within in order to accommodate whatever changes we see coming from the automotive industry.