Proton dealers to enjoy bigger slice of after-sales business

Dealers now have to adjust to new strategies and concepts to remain relevant in the business


There might be a time when Proton Holdings Bhd car dealers had a rather straightforward modus operandi for doing business.

Once a dealership deal is sealed, rent a huge space to display the models, or maybe rent a few shoplots at the designated catchment areas, hire good car sales personnel and you’re good to go.

Well, that was when 70% of the dealers’ profit was derived from car sales.

These days, with all the stiff competition among distributors for different makes of cars and as more consumers demand more than just getting their desired models, dealers now have to adjust to new strategies and concepts to remain relevant in the business.

According to Proton Edar Dealers Association Malaysia (Peda) president Liew Vee Lee in a recent interview with The Malaysian Reserve (TMR), income from car sales has been declining, while the after-sales segment is seeing an uptrend.

He said between 2006 and 2010, car sales made up some 70% of the dealers’ income, while revenue from after-sales services was 30% of the total earnings.

However, between 2011 and 2015, the income from sales dropped to only 37%, while the after-sales sector maintained at 30%, with additional services contributing much of the overall revenue including hire purchase commission (15%), insurance (15%) and accessories (3%).

“As for 2016 onwards, sales contribution has dropped further to less than 24%, while the services segment increased up to 38%.

“Both financing and insurance revenues have been at around 15%,” he said, adding that another 5% has been from the sales of accessories.

The remaining 3% is achieved from the extended warranty segment.

“As such, we can see that we cannot solely rely on sales as there is much more room and opportunity that could be generated from the aftersales,” he said.

Liew added that apart from services and spare parts, the body and paint sector could also contribute higher income compared to the sales division.

Moving with the times, more Proton car dealers are now more convinced to spend millions in upgrading their outlets.

From only relying on sales (in the 1S category), they are now ready to offer more services such as repairing, providing spare parts and even painting, which are all housed under one roof — also known as the 4S service centres.

Up to last month, Proton managed to convince up to 87 outlets to sign the dealer network upgrade agreement to expand their businesses to 3S centres (sales, services and spare parts) or 4S centres (including body and paint).

Proton Edar Sdn Bhd reported that the scheme has been progressing well. In fact, the initiative is two months ahead of schedule as it has achieved up to 80% from its initial tar- get of transforming 109 outlets, which is set to be completed by October this year.

As of last year, Proton Edar had about 170 dealers nationwide before it initiated the agreement that required their dealers to transform their outlets into one-stop centres.

With the new deal, the centres can also accommodate Proton’s future products, while reviving the company’s brand image, as well as delivering the “true meaning of an automotive dealer” in the world, which augurs well with the national carmaker’s turnaround plan in ensuring business suitability.

Liew said car distributors are also now more certain that they can earn more by expanding into after-sales services.

Last April, TMR reported that Proton had managed to convince its dealers to upgrade their showrooms, via scaled-down packages that were introduced later to assist its smaller existing players.

The packages had also attracted a number of new dealers to invest in the carmaker’s future business.

The dealer’s network upgrade is part of Proton’s new management move, in turning around the carmaker which has been losing its marketplace to other brands, including the Japanese Honda Motor Co Ltd.

Proton CEO Dr Li Chunrong had set a benchmark for Proton to compete with more premium brands such as Honda and Toyota, despite always being compared to Malaysian car company Perusahaan Otomobil Nasional Kedua Sdn Bhd.

He said among the main tasks of the company is to improve Proton’s brand image among Malaysians by improving its after-sales services, as well as producing quality vehicles.

“After-sales service is important; and the people, they reflect our corporate culture. The right products, and secondly, right services that give customer satisfaction,” Li said after launching the Pantai Bharu Corp Sdn Bhd 3S outlet recently.

He said the company is aiming for a turnaround in its operations by the year 2020.

The company also anticipates that its upgraded outlets would increase their sales and services revenue by up to 50%.

Besides the encouragement of the 3S upgrade, Proton Edar — the group’s marketing arm — has also come out with various promotions, including the years of warranty and free services which could tie their customers to the outlets after the product purchase.

Proton has to struggle to remain relevant in the saturated industry, as the total industry volume (TIV) has seen declining trends.

Last year, about 576,635 TIV was recorded, dropping 0.6% compared to 580,085 units in 2016.

As at last month, Proton only sold 27,106 units of cars, which was supported by the June growth in sales — a 50% jump compared to May 2018 — as consumers largely took advantage of the zero-rated Goods and Services Tax and Hari Raya promotions.

On average, the company sold 4,518 vehicles as of the first half of this year (1H18).

Last year, the carmaker sold 70,991 units of cars, slightly lower than 72,290 in 2016.