Proton sees 14% decline in distributors post-Geely deal

pic by TMR

PROTON Holdings Bhd has seen a sizeable drop in the number of distributors, two years after Chinese automaker Zhejiang Geely Holding Group Co Ltd became a major shareholder in the national carmaker.

The push for better after-sales service and lower car sales last year forced 47 Proton dealers to close shop as of September this year, cutting the total count by about 14% to 297 dealers from 344 dealers in 2017, prior to Geely’s entry.

All 47 affected dealers were Bumiputera distributors.

“According to Proton, the decline in the number of Bumiputera distributors was a voluntary business decision made by the owners. Apart from the upgrade to 3S (sales, services and spare parts) or 4S (including body and paint) centres, other factors for the closures could be due to slow sales in 2017 and 2018,” International Trade and Industry Minister Datuk Darell Leiking said in a parliamentary reply on Tuesday.

Geely’s purchase of a 49.9% stake in Proton for RM460.3 million in June 2017 has seen the new shareholder introducing a regeneration plan which requires dealers to spend millions on upgrading showrooms and service centres.

The new dealership programme stipulates that every dealer to provide 3S, as well as sell Proton cars.

This follows a downward trend in income from car sales, with the after-sales segment seeing an increase in revenue.

While the upgrade is non-mandatory, Proton has encouraged dealers to uplift their service centres to improve customer satisfaction by offering integrated services.

The national automaker said this would, in turn, help boost distributors’ total income.

“Proton has so far received 277 applications from existing dealers to upgrade their dealership to 3S/4S centres. Applications from Bumiputera distributors are favourable at 73.5%, or 72 applications from 98 existing Bumiputera dealers.

“In this regard, Proton welcomes the involvement of Bumiputera companies, either through existing distribution networks or new investors, on the opening of new Bumiputera-owned 3S/4S centres,” Darell (picture) said.

Proton’s car sales figures were relatively uninspiring for 2017 and 2018 before the release of its best-selling X70 model in September last year.

It reclaimed its spot as the country’s second top-selling carmaker in April for the first time since February 2016, driven by the X70 and an improved brand image.

DRB-Hicom Bhd, the majority owner of Proton with a 50.1% stake, sought Geely as its foreign partner two years ago to fulfil one of the terms of a soft loan it acquired from the government in 2016.

Under the agreement, Proton had to secure a foreign partner to enhance its research and development capabilities. DRB-Hicom had recorded declining revenues from its Proton business.