Proton turnaround to be positive re-rating catalyst for DRB-Hicom

PETALING JAYA: RHB Research Institute is optimistic on Perusahaan Otomobil Nasional Bhd’s (Proton) initiatives to improve its brand image, and expects the national carmaker’s successful turnaround to be a positive re-rating catalyst for its controlling shareholder, DRBHicom Bhd.

Post-visit to Proton’s several recently-upgraded 3S (sales, service and spare parts) centres, the research house said the revamp in Proton’s sales and services network gave the centres “a more exclusive look and aspirational feel”.

The research house said the opening or upgrading of these new centres is also part of Proton’s exercise to re-map its whole dealer network.

Moving forward, it said Proton would focus on 3S and 4S centres by incentivising dealers to upgrade their centres – one new dictate is only allowing upgraded centres to sell upcoming models.

“This should improve overall dealership network management and translate into better customer service quality.

“Proton has now achieved 92% (or 100 outlets) of its 102 total target, for outlets upgrading to 3S or 4S status,” it said in a note on DRBHicom.

On the Geely-Proton venture, RHB Research said the market’s initial response to the Proton X70 was positive, with bookings already surpassed 8,000 units even before the official launch.

“We are further encouraged over recent news on upcoming models based on the Geely SX11 and VF11, which should provide the basis for new Proton models over the next two to three years,” it said.

In greater emphasis of product quality, Proton has also adopted an international benchmark – the same employed by Geely and Volvo – to conduct product quality audits, according to RHB Research.

To recap, China’s Zhejiang Geely Holding Group Co Ltd completed its acquisition of a 49.9% stake in loss-making Proton from DRBHicom in September 2017. Currently, DRB-Hicom owns a 51% stake of the national car manufacturer.

Moving forward, Proton is expected to face some teething challenges in its pursuit to improve its service and product offerings.

These include the inability of Proton’s existing sales network to sell higher-end products, as its sales teams are more used to selling affordable, entry-level segment cars.

In addition, RHB Research said a potential supply and demand gap for the Proton X70 may end the hype on the model and lead to a bad customer experience.

“All in, we are positive on Proton’s initiative to change consumers’ perception to one that realises it offers value-for-money, affordable vehicles that come with excellent customer service.

“We like the overall atmosphere of the upgraded centres and left with a good impression of the facilities,” said the research firm.

It added that product-wise, traction on the X70 pointed to positive consumer confidence on the Geelybased model.

RHB Research has maintained its “buy” call on DRB-Hicom, with an unchanged target price of RM2.92.