Proton in China — closing in on the dream

It is crucial for local players to gain the advantage of tapping into the Chinese market


It certainly would make a very nice picture — Proton cars criss-crossing among 300 million cars on the streets of China’s busiest cities.

The vision could be a reality as early as next year, as a result of the recent signing of the heads of agreement between Proton Holdings Bhd and Zheejiang Geely Holdings Group Co Ltd that was witnessed by Prime Minister Tun Dr Mahathir Mohamad last week in Huangzhou, China.

If everything goes as planned, the deal will allow Proton to assemble and market its products in the country that has a population of 1.4 billion.

The proposed manufacturing facility will be a joint venture (JV) between the two carmakers, with both companies taking up equal equity.

After the signing, DRB-Hicom Bhd group MD Datuk Seri Syed Faisal Albar Syed Ali Rethza Albar said the JV corporation will also provide opportunities to Proton’s existing component vendors, which would definitely sit well with the Malaysian government’s objective to help local component makers grow and venture into the Chinese market.

At the launch of a Proton 3S (sales, services and spare parts) centre in Petaling Jaya, Selangor, yesterday, Proton Edar Sdn Bhd CEO Abdul Rashid Musa said the company is embarking on a feasibility study to pave the way for the Chinese venture and that the process will take some time.

He added that the whole deal would still depend much on further discussions between Proton and Geely.

“What has been signed is about electrification and globalisation of Proton. So, we are working on the feasibility study to start detailed work on this programme,” he told reporters.

As stipulated by the recent agreement, Proton and Geely aim to establish the JV corporation before March next year.

China’s passenger car sales grew from 6.76 million in 2008 to over 24 million units in 2017.

Last year, Geely — the Chinese carmaker leader — sold more than 1.24 million units, carving out a 5.06% market share.

Proton is expected to ride on the JV’s capacity to allow the brand’s penetration into the market.

While waiting for the establishment of the JV, local vendors are gearing themselves to be part of the massive undertaking, as Malaysia’s total industry volume is already in a saturated stage.

It is, therefore, crucial for local players to gain the advantage of tapping into the Chinese market.

Abdul Rashid said the government definitely has a localisation policy.

“So, we need to bring in new technology (through the JV) to Malaysia. As the first national car, we carry a bigger agenda to enhance the capability of Malaysian citizens and also the country, to be competitive in soft- ware and hardware,” he said.

WSA Group chairman and CEO Datuk Dr Wan Mohamed Wan Embong, one of the Proton vendors contacted by The Malaysian Reserve (TMR), said the deal might actually be a way for Malaysian vendors to penetrate the Chinese market.

However, it should not be a mere excuse for the “floodgates” to be opened as the auto company brings in a massive number of complete built-up (CBU) units into Malaysia.

“We understand the need to import some CBU for test marketing purposes, but not for mass distribution.

“It should only be allowed if the units are subjected to the standard import and excise duty. There should be no exemption. It must be fairly and firmly implemented,” he said.

Wan Mohamed said any car manufacturer that wishes to enjoy national brand privilege and incentives should support the localisation policy continuously, which in turn would contribute towards the country’s economy in the long run.

“Automotive manufacturing involves so many disciplines from human resource development, different raw materials, design, engineering including testing, process and production, logistics, marketing, finance and others,” he said.

Last year, the Malaysian auto industry provided 736,632 employment, or 4.9% of the 15 million total workforce in the country, contributing at least 4% of the gross domestic product (GDP).

According to Malaysia Automotive Institute (MAI) data, there are 641 parts and components manufacturers (vendors), 27 vehicle manufacturers — or known as OEM (original equipment manufacturer — and 53,011 after-sales business players during the year, with 27,175 jobs created throughout the business chain.

This year, MAI expects about 29,641 new job creations in the indutry, contributing around 4.5% of the national GDP.

In 2017, 23,444 foreign workers were replaced via upskilling and reskilling programmes for the automotive segment conducted by the government, which indicates the spirit of giving more jobs to Malaysians.

“As such, any OEM that wants to be classified or given the privilege as the national brand, must be involved in ‘nation-building’ — in terms of providing jobs to locals,” Wan Mohamed said.

MAI also reported that between 2014 and 2017, the total committed localisation in the automotive industry was valued at RM43.67 billion.

The institute, however, forecast that committed localisation will only be around RM15 billion in the next four years.

Dr Mahathir had expressed his frustration over public outcry that failed to understand the spillover effect of having a national car, especially in terms of boosting the economy and technology knowledge.

Dr Mahathir said Malaysians cannot continuously be consumer-centric citizens, while preferring imported vehicles which do not contribute significantly to long-term national development.

“You must remember that if you don’t have industries, you will very soon cease to become good consumers because you don’t have the money.

“The idea is to build up Malaysian engineering capability, so that we would be making money for ourselves by exporting our products.

“When you import, you are exporting your money and if you keep exporting your money, you will become poor. This is very simple thinking,” he told TMR in an interview recently.

Dr Mahathir had proposed for the development of another national vehicle after being appointed as PM for the second time in May.

The initiative came after Proton, which embarked in 1981, was partially acquired by Geely last year.