Proton Holdings Bhd last week started an unusually protracted nationwide launch of a new car model, codenamed BLM, its first major project since braking off alliance talks with Volkswagen and other potential overseas partners late last year. According to local reports, Proton has been given a few years to prove that an independent strategy can succeed.
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So far, only a few parts of the new BLM model have been unveiled to the public – the frame and some suspension parts, in an unusual campaign designed to draw attention to the company’s in-house technology achievements and to build up public curiosity. The model will slot between the Gen2 and the Savvy.
The two-week campaign will involve displaying the chassis, body and interior trim at various locations across the country and finally the complete vehicle will be unveiled at a central location in Kuala Lumpur in mid-January. At between RM31,000-40,000, the BLM will be one of Proton’s lowest-cost cars and is described by a company insider as the “most affordable, comfortable, practical and stylish model ever produced by Proton”.
The BLM will be the second mainstream Proton model developed “mostly” in-house, after the launch of the Gen 2 in 2004. It will feature a 1.3L version of the in-house Campro engine fitted with its newly-developed intake air-fuel module (IAFM). The company’s first significant effort to reduce its technological dependence on Mitsubishi was with the current Waja model, launched in 2000.
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By GlobalDataProton’s unrelenting focus on developing its own in-house technology underpins the company’s deep-rooted hopes of remaining an independent car company – despite a decade-long history of flirting with foreign vehicle manufacturers. Former prime-minister Dr Mahathir Mohamed, who was behind the establishment of the first national car company in the early 1980s and still a staunch defender of its independence, continues to exert significant influence in Malaysia’s main business circles and in the country’s automotive industry in particular.
Proton’s renewed confidence comes on the heels of a return to profit – albeit a modest one (US$1m net) – in the second quarter of the current fiscal year, compared with a loss of around US$72m a year earlier. The earnings turnaround is attributed mostly to the new Persona model, which has helped stem its loss of market share at home, and a one-time gain of US$13.5m from R&D writebacks.
Nevertheless, Proton’s renewed self-belief mostly reflects the significant growth that has taken place in developing markets in Asia and the Middle-East in the last five years and the growing role Proton believes it can play in these regions. With opportunities at home becoming increasingly limited as foreign brands continue to gain momentum, Proton will have to rely more heavily on overseas markets in the future – in addition to the continued “R&D support” from the Malaysian government.
Proton’s global sales in 2007 are expected to reach 120,000 units, including around 12,000 from overseas markets. This is half the peak volumes of the mid-1990s, with domestic and export sales having suffered equally as badly.
Greater focus on Emerging Markets
Proton has stepped up expansion in some of the world’s fastest growing emerging markets in recent years. In 2005, the company launched a partnership with Iran’s Zagross Khodro to assemble a few thousand Waja models per year for the local taxi market.
In late 2007, Proton and its Iranian partner announced the “Islam Car” programme – a car to be assembled in Malaysia, Iran and Turkey fitted with additional “Islamic” features designed to appeal to buyers across the Middle-east and in other Islamic markets. The programme, which will essentially be little more than a marketing exercise to underline the Islamic credentials of Proton’s cars, is slated to begin in 2011.
Proton returned to the Indonesian market in 2007 and is expected to sell around 1,200 units in 2007. The vast majority of these are expected to be Wira models for the local taxi market – as private sales struggle to take off. In late 2007, Proton also launched its cars in Thailand, but here too it is unlikely to find an easy market.
An agreement was reached in mid-2007 with China’s Jinhua Youngman Automobile Group Ltd –a bus manufacturer based in Zheijiang to export 30,000 Gen2 models in CBU format to its Chinese partner over an unspecified period. They are being sold in China under a newly-created “Europestar” badge. Eventually, Jinhua Youngman plans to assemble CKD kits and collaborate with Proton and its Lotus Cars subsidiary in new product development. CBU shipments began in late 2007.
According to local reports the Malaysian government has given Proton a few more years to develop a viable independent strategy before the national carmaker is reassessed and its future decided. With growth opportunities likely to remain limited in its home market, its new emerging market alliances will be key in deciding Proton’s future.
Tony Pugliese
