Potential comeback for DRBHicom with two CKD models
The team at AmInvestment Bank Bhd (AmInvestment Bank) is taking a change of view on DRB-Hicom Bhd (DRB-Hicom) from its usual view of being a proxy of the Proton car brand.
This was based on expectations of DRB-Hicom’s market share expected to expand due to shift in consumer preference towards affordable vehicles with valueadded features.
“We are witnessing a shift in the general consumer’s preferences towards cheaper alternatives with more to offer, ultimately benefitting leading to national marques’ Proton and Perodua,” it said in a company report yesterday.
“The group has guided that the new 2019 Persona and Iriz have received a total of 13,000 and 3,500 bookings respectively – a jump of 108 per cent and 180 per cent from their 2018 pre-facelift models respectively.
“Together with the popular X70 and Saga, Proton has managed to capture a yearto-date market share of 14.7 per cent, edging closer to Honda’s 14.9 per cent.
“However, by end-2019, we expect Proton to be in the second spot, behind only Perodua, backed by the continuing strong demand of the X70, Iriz and Persona; together with the upcoming introduction of the Saga 2019 facelift in October.”
The localisation of the X70 is also expected to provide more competitive pricing, challenging the non-national marques in the sports utility vehicle (SUV) space.
This comes as Proton has reiterated its aim to begin production of the X70 in the Tanjung Malim plant in the second half of 2019.
“We are excited over this as we expect to see a price reduction with the introduction of the completely knocked down (CKD) model to continue supporting the strong demand for the vehicle,” it said.
“We should also see better monthly sales and delivery numbers should the localisation plan takes off; which is positive for Proton’s turnaround plan.
“The group guided that the local content of the X70 will start with 10 per cent will progressively increase to 80 per cent by 2023.” Meanwhile, more Geely models are expected to be introduced with attractive pricing to turn around Proton.
Recall that Proton has secured the use of intellectual properties (IP) and the rights to manufacture and sell up to 4 Geely cars for 5 years.
“In a brief conversation with the management, we were informed that the longawaited X50 will be introduced in October 2020 as a CKD version.
There will not be a completely built up (CBU) version of the model.
“The group also guided that there is an unnamed model in the pipeline — highly likely to be a Geely-inspired 7-seater MPV.
These models will be key in shaping the local automotive sector as they come in very attractive price tags and are essential in aiding Proton in its turnaround plan.”
All these left AmInvestment Bank to believe that DRB-Hicom’s share price still has upside as Proton continues to slowly but steadily regain traction in the local automotive space.
“As we witness the group’s ongoing aggressive efforts to revive and win investors’ confidence in the Proton brand, we believe that the turnaround plan might come sooner than expected.”