National car maker eyes SUV market under partnership
AFTER more than 12 months, Proton Holdings Bhd has finally picked Chinese carmaker Zhejiang Geely Holding Group Co Ltd (Geely) as its foreign partner to turn around the company.
In the last 15 years, Proton market share has been on a downward trend, due to fierce competition from cheap imports, and the company was making serious losses.
Proton’s market share fell to 12.5% from 15.3% in 2015, ranking it at No.3 behind Perodua and Honda.
In 2016, Proton sales dropped almost 30% to 72,290 cars from 102,174 in 2015.
But there were mixed views among analysts on the deal with Geely due to the challenging outlook for the automotive industry and the saturation point in terms of the domestic auto sales.
“Proton still has to deal with the challenges posed by increasing competition and a weak brand perception.
“The outlook for DRB-Hicom Bhd remains challenging given the tough operating environment of lower sales of motor vehicles amid stiff competition,” Kenanga said in a report.
DRB-Hicom which owns Proton, has signed heads of agreement with Geely to sell a 49.9% stake at an undisclosed price.
During a briefing on Wednesday, DRB-Hicom group managing director Datuk Seri Syed Faisal Albar has made it clear that for Proton to move forward, the national car maker must seek growth beyond Malaysia.
This is in view of the weakening vehicle sales last year that saw a decline after six years of growth. All passenger car segments saw slow sales in 2016 except for the (sports-utility vehicle) SUV segment.
Under the partnership with Geely, Proton will be developing its first SUV model from Geely’s bestselling model – the Boyue.
Nevertheless, Malaysia Automotive Institute CEO Datuk Madani Sahari reckons as the alliance will see Proton develop more mid-range passenger cars and SUVs.
Proton focuses primarily on entry level models. With its partnership with Geely, Proton aims to sell 500,000 cars in 2020.
“SUV is the fastest growing segment in the world. This trend is growing not just in the United States but also in Asia.
“A lot of companies are pushing for SUVs. A case in point is Honda – it has the CR-V and the all-new BR-V model. It was smart to cash in on this model early,” says an analyst.
Madani says Proton’s decision to partner Geely is to allow the national carmaker to expand its technology, lower development costs and expand its reach within the Asean region, a market that is expected to produce six million cars by 2020.
“At the same time, the partnership with the Chinese marque opens up opportunities for Proton to penetrate the large Chinese market,” he tells StarBizWeek.
He points out that Proton will need to look beyond 2020 and tap into battery technology and electrification, to cater to the medium-term future uptake.
Proton’s current models have shown a great track record in terms of safety features as seen in its high safety ratings.
Although Proton will retain its brand, Geely plans to extend its right-hand drive cars in the SouthEast Asia market.
Malaysia is the base for Geely to exports its vehicles tax-free to any of the 10 Asean members.
“The partnership between Geely and Proton is to unlock sales for both companies in the Asean,” an analyst says.
According to Madani, since the introduction of the National Automotive Policy 2014, the existing original equipment manufacturer (OEMs) such as Mazda, MercedesBenz, Honda and Toyota, have expanded their operations in Malaysia, and made the country an export hub for Asean.
He says that two more OEMs are applying to open a manufacturing plant in Malaysia.