Proton vendors given 30 days to cut prices by 20%

The Proton car parts 20% price cut applies for both current and future models

By AFIQ AZIZ / Pic By AFIF ABD HALIM

Proton vendors have been given a month to slash the prices of the parts supplied to the carmaker by 20%, or stand to risk the business as the new management upped the gear to manage costs and speed up the turnaround at the car company.

A vendor for the carmaker told The Malaysian Reserve (TMR) that the Proton car parts 20% price cut applies for both current and future models.

The vendor, who declined to be named, said vendors who agreed to the terms have been promised new opportunities including to supply parts for future Proton models including the SUV, Geely Boyue rebadged.

The vendor who has been supplying parts to Proton for about 20 years, said another 10% component price cut is expected in December next year, making the total reduction of auto parts made for Proton to be 30% cheaper.

Proton, which was the country’s leading carmaker in term of sales, has been struggling over the last decade. In 2007, the car company that first produced rebadged Mitsubishi in 1985, saw its market share falling to 24% from over 64% of the country’s total vehicle sales.

Besides contentions on Proton’s car quality, Malaysia’s openness to allow all brands to enter the lucrative car market had hurt what was a former national car project. Last year, Proton sold 72,290 vehicles. But, Honda Malaysia Sdn Bhd secured the second position selling 91,830 units, the first time the No 2 spot being held by a non-national car.

Proton sold 66,190 units from the January to November 2017 period, a 2% rise compared to a year ago. Last year, it sold 65,069 vehicles for the same period. In a statement yesterday, the national carmaker said, the Saga and Persona continued to lead all other Proton’s models with 28,368 and 18,113 units sold respectively year-to-date, making up for 70% of Proton’s total car sales.

“It has been a challenging journey for Proton since the past five years and the steady growth that we recorded from January-November 2017 is a positive achievement for Proton,” said Proton sales and marketing VP Abdul Rashid Musa.

Meanwhile, another vendor said Proton’s vendor conditions to cut prices could hit the suppliers chain.

“As it is, the drop in Proton sales had eroded our profitability,” the vendor who asked for anonymity told TMR.

The vendor claimed that the request for quotation (RFQ) that was agreed for the past four years was based on the average of 13,000 units production per month. He claimed that some vendors were unprofitable as Proton’s monthly production had dropped to about 6,000 units. The vendor also questioned on how the carmaker derived the said percentage cut for the auto parts.

While the prospect of new models resonate a brighter future, vendors remain wary on the potential sales.

“Some of the vendors do not want to invest in the tooling and development costs due to bad experience we faced with the failure of the previous models,” said a vendor.

Besides Boyue, other models that would be listed for parts sourcing include the upgraded Persona, Saga and Iriz, as well as a new subcompact crossover SUV which is slated to be in production in the next few years.

Zhejiang Geely Holding Group Co Ltd acquired a 49.9% stake in Proton and worries heightened that the company would source the auto parts from China.

Another vendor said the parts price cut would be acceptable, if Proton could sustain the production volume and RFQ similar to Perusahaan Otomobil Kedua Sdn Bhd.

Proton Vendors Association president Azalan Omar declined to comment on the issue as “the offers would depend on each vendor’s requirement”.

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