A tale of two man­u­fac­tur­ers — Pero­dua and Proton

New Straits Times - - News / Story of the day -

ELEVEN years ago, in April 2006, Proton Hold­ings Bhd, man­u­fac­turer of the na­tional car mar­que Proton, suf­fered a ma­jor set­back when the sales of Perusa­haan Oto­mo­bil Ke­dua Sdn Bhd, or Pero­dua, over­took it for the first time.

What was once its lit­tle sib­ling set up to man­u­fac­ture small cars, Pero­dua had grown to out­shine its big­ger, more es­tab­lished brother.

It was the hum­ble Myvi which gave Pero­dua an edge.

Ac­cord­ing to fig­ures com­piled by the Malaysian Au­to­mo­tive As­so­ci­a­tion that year, Pero­dua beat Proton by sell­ing 13,574 cars in April, gain­ing a 44 per cent mar­ket share against Proton’s 30.35 per cent mar­ket share of 9,290 cars.

Datuk Seri Na­jib Razak, who was deputy prime min­is­ter at the time, said the de­vel­op­ment should “spur Proton to do even bet­ter in the fu­ture”.

“We like this sense of com­pet­ing with one an­other in a friendly man­ner. I think that’s good for the con­sumers,” he was re­ported as say­ing.

At the same event, Na­jib was quoted as say­ing that both man­u­fac­tur­ers needed to im­prove their ef­forts to crack the ex­port mar­ket, which they had failed to pen­e­trate.

“It is ob­vi­ous that they need to go abroad.

“The lo­cal mar­ket is the big­gest pas­sen­ger mar­ket in Asean, but it is not enough for us to sus­tain,” he said in 2006.

More than a decade later, both still have only mar­ginal suc­cess in crack­ing the ex­port mar­ket.

As a re­sult, both ended up vy­ing for the lim­ited pie that is the Malaysian au­to­mo­tive mar­ket.

Proton even­tu­ally be­came the loster.

What caused Proton’s down­fall?

How did it lose its No. 1 po­si­tion to Pero­dua?

Why has its sales suf­fered dras­ti­cally?

There are myr­iad rea­sons. But chief among them was Proton’s in­abil­ity to ac­cess deeper tech­no­log­i­cal and fi­nan­cial re­sources.

Over the years, a num­ber of pos­si­ble tie-ups were mooted for Proton.

For a while, in 2006, a Proton-VW tie up in­volv­ing ei­ther a co­op­er­a­tion or eq­uity stake was said to be in the works.

Over the years, Proton had been said to have talked with PSA Peu­geot Citroen of France, as well as GM.

How­ever, none of them came to fruition for rea­sons un­known.

The de­lay is what cost Proton its mar­ket lead.

The modern au­to­mo­bile in­dus­try is a highly-com­pet­i­tive arena, which is tremen­dously cap­i­tal in­ten­sive. It takes tens, if not hun­dreds, of mil­lions of dol­lars to de­velop just a sin­gle model.

In this en­vi­ron­ment, strate­gic part­ner­ships are a com­mon fea­ture. The world has seen a long list of au­to­mo­tive al­liances. In re­cent years, ex­am­ples in­clude Re­nault-Nis­san, Mazda-Fiat, Hyundai-Kia and Citroen-Peu­geot.

With just the small Malaysian mar­ket as its play­ground, and lim­ited re­search and de­vel­op­ment funds, Proton con­tin­ued to floun­der. It couldn’t move for­ward.

Its model range suf­fered. Pero­dua brought in in­creas­ingly fuel ef­fi­cient cars with good lev­els of qual­ity, which was made pos­si­ble through its tie-up with Toy­ota Mo­tor Corp, which opened its doors to global lev­els of re­search and de­vel­op­ment, as well as economies of scale.

Malaysian Au­to­mo­tive In­sti­tute chief ex­ec­u­tive of­fi­cer Madani Sa­hari al­luded to this in an in­ter­view with the New Straits Times last year, re­fer­ring to Pero­dua’s highly suc­cess­ful tie-up with Toy­ota’s unit Dai­hatsu, and how Proton should “pull a Pero­dua”.

“The eq­uity dis­tri­bu­tion be­tween Pero­dua and Dai­hatsu at both hold­ing and man­u­fac­tur­ing lev­els is a good case study,” he said.

“The fair dis­tri­bu­tion cre­ated a lot of trust and teamwork be­tween the two en­ti­ties, re­sult­ing in the mar­ket per­for­mance we’ve seen from Pero­dua for the past few years,” he added.

He said Proton, which is a sig­nif­i­cantly smaller com­pany, should find a part­ner with ca­pa­bil­i­ties be­yond ba­sic tech­ni­cal stew­ard­ship, which would al­low it to grow to­gether and share re­sources, such as re­search and de­sign, plat­forms, and tech­nol­ogy, to cre­ate a leaner and more prof­itable en­tity.

“Proton will not lose its iden­tity. As in many al­liances men­tioned, all these brands co-ex­ist. Each brand has its own strength and at­trac­tion viewed from cus­tomers’ per­spec­tive,” he added.

As the brouhaha sur­round­ing Geely’s pur­chase of Proton dies down, Proton’s ex­ec­u­tives and en­gi­neers may soon wake up to find new tools at their dis­posal.

There is noth­ing con­crete yet, but Geely’s in­ter­est in Proton may give the lat­ter ac­cess to op­por­tu­ni­ties in the form of plat­forms, en­gines and var­i­ous au­to­mo­bile tech­nolo­gies, which the na­tional car maker can use to its ad­van­tage.

With economies of scale as well as Volvo-de­rived tech­nol­ogy from Geely, Proton may find it­self well-equipped to com­pete in the lo­cal mar­ket and against Pero­dua as well as big names like Honda and Toy­ota, giv­ing Malaysians bet­ter and im­proved model choices.

Fi­nally, Geely stated that it hoped to use Proton as a beach­head to ex­pand into South­east Asia. This will be made pos­si­ble by tak­ing ad­van­tage of the Asean Free Trade Area, which has re­duced or elim­i­nated tar­iffs on au­to­mo­biles in the re­gion for man­u­fac­tur­ers like Proton.

This may be a spring­board for Proton to set out to do what it should have done a long time ago and that is to grow be­yond its home soil, and con­quer mar­kets in the big­ger space that is South­east Asia, and per­haps one day, en­joy good sales glob­ally.

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