Is more better?

The fondness former Prime Minister Tun Dr Mahathir Mohamad has for Proton is beyond question. The extent he went to ensure Proton grew and fulfilled its role as the national automobile company is well documented. But Proton could not keep up with the competitive industry pressure, given the lack of scale it has with its operations and towards the end had to be rescued by China’s Zhejiang Geely Holdings Group.

Now, Dr Mahathir says he wants to start another car company should the Opposition win the next general election. That idea would be good from an investment point of view, but the reality is that the Malaysian automotive market is no longer the same as when Proton started in the mid-1980s.

One of the biggest problems Proton had was the lack of exports. The miniscule number of cars it exported meant it had to rely almost exclusively on the domestic market. It commanded a large share of the Malaysian industry at its infancy, but as the economy grew and the number of cars Malaysians bought increased, Proton’s sales and its market share of the industry sales fell.

It is not to say that any new company will replicate the mistakes of the past. Probably a new entrant will learn from previous missteps and make the necessary adjustments.

However, the market place today is way different from the past. Incentives given to CKD manufacturers, energy-efficient cars and rising incomes of Malaysians make the choice available today, and the purchasing power of Malaysians is far more variable than it was in the past.

Having a new entrant will create jobs, but the learning curve is not what it used to be. To compete in today’s world, any new entrant will need to spend a vast amount of money to develop a car. How will it then compete will be another issue, as Malaysians will have many choices in terms of buying a car where technology increasingly plays a bigger role than it had in the past.