Going where opportunity leads
Trader takes the leap to become manufacturer during time of crisis
THERE is an opportunity in every crisis.
And Trimas Auto Electrical Sdn Bhd director William Tan Tiam Hoo, 55, is quick to see such opportunities when they arise even during the gloomy days of the 1997 Asian Financial Crisis. When his trading business became a challenge, Tan took the opportunity to expand into manufacturing electrical wire harnesses and connectors for automobiles.
He started his automotive electrical components trading business in 1989 after spending four years doing door-to-door sales of sewing machines and electrical appliances and another year working for his uncle, who has an automotive spare parts shop.
“Working in the spare parts shop gave me exposure to the automotive industry and I saw the potential for a business there as vehicle sales were growing every year,” he says.
Only 27 at that time, Tan did not have much capital on him. Hence, his business was housed in his own rented home in Selayang, Kuala Lumpur, and help came in the form of his wife.
“We even do our own despatch and we supply to most of the car workshops around Malaysia, except for Perlis,” he says.
After some time of working with these workshops, Tan managed to gain the trust of the mechanics and workshop owners as his supply of electrical components had very low defect rates. This helped his trading business grow.
“Trust is important,” he says. “If we know that a supplier has supplied parts that are not good to us, we would rather keep it and absorb the losses than sell those faulty products to the workshops. That is why we have to be very careful when sourcing for the parts.”
But being able to source for quality components is not always easy. Tan obtains his stock from other importers and the products range from various sockets to switches. There is no telling what damage the products may have endured while changing hands and it is not easy to trace where the damage happened.
So in 1995, Tan decided to import all the products on his own so that he could deal directly with the main suppliers. He brought in over 1,000 automotive electrical parts including light bulbs.
That helped him to keep a tighter control of the quality of the products.
However, the ringgit started depreciating significantly around 1997. By September 1998, the ringgit was hitting well above RM4.70 to the US dollar. The depreciation of the local currency was so fast that businesses were caught flat-footed.
“Times were bad and we faced a lot of difficulties paying for the imported products. Things just got too expensive due to the ringgit depreciation,” Tan says.
He had no choice but to increase the prices of his products between 30% and 50%, much to the chagrin of his clients, to cope with the sudden spike in import cost.
While he needed to continue importing these products to ensure sufficient supply for his business, Tan also knew he had to find an alternative to secure the future of his company. And that was when he picked up on the opportunity to diversify into manufacturing some of his own products.
This way, he would not remain just another distributor at the mercy of manufacturers, and he would have better control over the quality of his products.
But Tan didn’t just dive right in. He took a look at his resources and only selected several products which he knew were within his capabilities to manufacture. This included the production of wire harnesses used for various systems in a car like the lighting, ignition, air-conditioning and gearbox systems.
In 1997, he started his manufacturing operation in a one-and-a-
half-storey light industrial factory in Kepong, KL.
There were other products such as power window switches and lighting systems, which he continued to distribute till today.
Tan concedes that he does not have the expertise to manufacture everything and even if he could, consumers may not be so ready to accept them if they were “made in Malaysia”.
The major players in this segment of products are Taiwan and China. And Tan’s strategy to compete with them is to price his products between the prices of the two other countries.
“People were sceptical of what we produced at first. Our customers ordered only very small quantities, but as time went by, people started to realise that our product quality is good and more orders started to come in,” he says.
Today, they have over 2,000 varieties of wire harness for various automotive brands.
Tan also saw an opportunity in other problems. He noticed that there were many complaints from car owners who were not able to use their battery booster cable, or commonly known as the “jumpstart cable”, when their car battery dies due to their poor quality.
So Tan decided to produce them himself.
Many of his peers questioned his decision to manufacture such cables as they were already widely available in the market at a cheap price.
His only reply was: “Buying a cheap product is pointless if it doesn’t work.”
You are simply buying to throw, he adds.
“We have to understand the quantity and quality of copper materials required to make these products. It is not as simple as copying someone else’s product,” he says.
Not surprisingly, he managed to sell over 10,000 sets of his new cables within the first year as he had, by then, gained market trust in his products.
Trimas also works with automotive brands to provide them with equipment for their vehicles.
Tan further invested in moulds to manufacture connectors, which comprise sockets and terminals, and today, has over 1,000 varieties of connectors. Of this, he is particularly proud.
“Some of these parts are so difficult to find that we have met wiremen who told us that they were searching high and low for the component for over three months before they found us.
“And for car owners, they also save a fair bit. Sometimes, they are advised to change a major component in their cars simply because the wiremen are not able to find a replacement for a broken connector. But now, we have them,” he says.
Tan explains that sometimes, sockets spoil not because of their poor quality, but because the wiring used is low-quality copper quality or does not meet the required quantity.
“Terminals manufactured with low copper content will increase the resistance to the current and create heat, melting the sockets,” Tan adds.
The company achieved revenue of RM7mil and currently operates in three factories in Kepong, KL. They also have a shop lot in Segambut, which Tan dubs as a “spare parts city.”
“Mechanics looking for spare parts for clients are often seen riding a bike going from shop to shop to enquire. And many of them walk through our doors,” he says.
Tan’s decision to go into manufacturing in 1997 has helped him grow the business even outside Malaysia. Today, he serves clients from Australia, Singapore and South Korea, among other countries.