Eye on the margins

Proton returned to profitability last year, sold more than 100,000 vehicles

Pic By TMR File

PROTON continues where it left off in 2019 — gaining market shares, displacing Japanese brands — and eyeing for the grand trophy, the No 1 carmaker in the country.

The loss-making carmaker returned to profitability last year, sold more than 100,000 vehicles and displaced Honda as the secondbest-selling brand in the 600,000 total industry volume (TIV) local market.

In the first month of 2020, the overall industry witnessed slower sales with delivery dropped year on- year (YoY) and quarter-on-quarter (QoQ).

But Proton went against the tide, registering 8,506 passenger vehicles, up 20% YoY. The Shah Alambased carmaker increased its market share to close to 20% although its QoQ sales numbers fell. February sales rose to 9,974 units, a 17.3% increase over January and a whopping 80% higher YoY. As a result, Proton’s market share for the month is estimated to stand at 23.8%.

The revitalised Proton brand under the stewardship of China’s Zhejiang Geely Holding Group Co Ltd, sold some 100,821 cars last year or one in every sixth vehicle sold in the country last year carried the Proton logo.

The move to enter the SUV segment with its complete built-up (CBU) X70 had powered Proton with 26,464 units sold and a 21.2% market share. Buyers rushed to buy the SUV which was seen as a bargain based on the specifications against similar competitors.

Proton expects to keep the momentum going into this year with the introduction of the complete knock-down (CKD) X70 SUV or X70 2020 which is fully put together at its state of the art Tanjung Malim, Perak, plant.

The feedback from the market has so far been positive. The company had received over 7,000 bookings since the launch in mid-February.

The locally built X70 is priced RM3,000-5,000 cheaper than the CBU import but with more features.

Industry rivals and analysts will now be keeping an eye on what and how Proton’s CEO Li Chunrong does to maintain margins with the CKD X70 as the auto sector gets to be more challenging this year. The Covid-19 outbreak has somewhat pulled the brakes on many sectors.

On paper, it would suggest the sales of the model would not have cost advantage from scale compared to what Geely enjoyed in China with the CBU X70.

To get the benefit of scale across its models, Proton needs to aggressively chip away Perodua’s commanding market share in the sedan space, very likely at the expense of margins.

In the works, according to reports, is the new CKD X50 SUV which is expected to be launched in the second half of the year. The model is targeting the mass market and will compete against the likes of Perodua’s Aruz and Honda’s BRV.

The cut in the Overnight Policy Rates by 50 basis points by the Bank Negara Malaysia this year will make purchasing cars cheaper, a boost to carmakers like Proton. It would be the main selling point.

But how well the market responds, would likely depend on the economic situation and consumer confidence in taking up big purchases.

Bhupinder Singh is the corporate desk editor at The Malaysian Reserve.