Govt to meet Proton vendors over upgrade grouses

By SHAHEERA AZNAM SHAH & AFIQ AZIZ / Pic By MUHD AMIN NAHARUL

International Trade and Industry Minister Datuk Seri Mustapa Mohamed said the government will talk with Proton Holdings Bhd’s dealers who claim they have trouble meeting requirements of the national carmaker since it changed ownership last year.

Mustapa said the government will address the challenges faced by local vendors to remain competitive under Proton’s new management since it was taken over by China’s Zhejiang Geely Holding Group Co Ltd.

The carmaker is undergoing changes, which include a shake-up of its supply and distribution chain under a 10-year plan to make it profitable.

Some vendors, mainly members of The Malaysian Association of Malay Vehicle Importers and Traders (Pekema), are finding it hard to keep up with new requirements that include million-ringgit upgrading of their showrooms and service centres.

Mustapa said the government is concerned over the complaints.

“Transformation has not always been a walk in the park. There will be parties who are going to be affected and the government is concerned about this issue.

“We will meet with the association first before we meet the distributors,” he said.

Dealers for the national carmaker are required to upgrade their service from 1S centres into an integrated sales, service and spare-parts (3S) centre.

Proton said the enhancement of the outlets is in line with the new guidelines in its business expansion plan.

Pekema claimed that Proton has not been fair to the Bumiputera distributors and the upgrade is a tough call.

The Malaysian Reserve (TMR) had reported that it would require dealers up to RM3 million, excluding the land price, to build a standalone 3S outlet.

It also added that most 1S centres are owned by Bumiputeras and do not have the capacity to execute the expansion.

Proton local suppliers have also taken issue over claims that they enjoy a profit margin of 30% on Proton sales, a figure that was cited by the carmaker when it asked them to take a lower profit.

Suppliers who spoke to TMR said their margins are much lower as the lower than promised Proton sales have affected their production estimates.

One vendor who spoke on condition of anonymity said it is impossible to make a 30% profit on the recent volumes of Proton car sales.

He said in 2017, Proton sold about 72,000 vehicles, or an average of 6,000 a month, compared to 200,000 annually it sold in the last 20 years based on the carmaker’s standard price format (known as Quotation Account Format [QAF]).

“Based on QAF, an average profit local suppliers are making only between 3% and 5%,” said the source.

He said the cost of raw materials in general make up around 60% to 65% of the selling price, manufacturing cost (16%-20%), sales and general adminnistration cost (5%-8%) and other costs (5%-6%).

“Generally, the overall cost would be around 95%-97% of the selling price,” he said.

He said the 5% margin would also be dependent on Proton’s estimate on its production number for each car models as these calculations were based on if Proton is producing 23,000 cars a month, compared to just 6,000 a month it produced on average for 2017.

“Don’t blame the vendors for struggling to keep up,” he said.

Meanwhile, talks over the Regional Comprehensive Economic Partnership (RCEP) will resume in March this year, Mustapa told reporters on the sidelines of the “MySMEBank and the SME Bank Y-Biz Challenge 2018” launch in Kuala Lumpur yesterday.

Last week, country representatives and lead negotiators were in Yogyakarta, Indonesia, (Feb 2-9) to attend the 21st round of RCEP meeting.The 21st round of meeting involved the discussion of trade of goods and services, investments, issues regarding legal issues and institutions, and the rules of origin.

RCEP is a free trade agreement between Asean’s 10-member states and six other countries, namely Australia, China, India, Japan, South Korea and New Zealand.

Once sealed, RCEP will become the world’s largest trade bloc that could significantly boost the country members’ economic growth.