Shares of Malaysian automaker Proton Holdings reportedly nose-dived on Friday after Volkswagen scrapped a joint venture plan to build and sell its cars for the Malaysian and Southeast Asian markets, as analysts predict a bleak future for Proton.
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According to Kyoto News, Proton’s share price opened at 5.10 ringgit (about US$1.36), the lowest in four years. It was down 1.25 ringgit, or 19.6%, from Thursday’s closing price of 6.35 ringgit at Bursa Malaysia, the Malaysian exchange. The stock price ended on Friday at 5.65 ringgit.
The report said the beating came after Volkswagen chief executive Bernd Pischetsrieder told investors in Detroit that the joint venture is off due to differences.
He reportedly added that Volkswagen would still continue talks with Proton on a ”few isolated projects” to ”support Proton.”
According to Kyoto News, Proton remained tightlipped, merely stating that it is awaiting official communication from Volkswagen.
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By GlobalDataHowever, Mayban Securities Research reportedly painted a bleak picture of the national car company, describing it as ”quite a big setback.”
”Proton would unlikely be able to access Volkswagen’s ready and established global distribution and supplier network as per a strategic tie-up,” it said, according to the report. Mayban downgraded its rating on Proton’s stock to ”hold” from ”trading buy.”
HLG Securities Research reportedly said Proton’s ”lifeline (is) in shreds.” This latest development is ”worrying,” HLG said in a statement, noting that Proton had recently reported it was unable to fund new model development.
”Without a strategic partner to embark on joint developments, we are doubtful on Proton’s ability to develop hot-selling new models judging from its self-developed Savvy, which is not overwhelmingly well-received,” HLG said, according to Kyodo News.
The news agency noted that Proton has been looking for a foreign partner ever since Mitsubishi Motors and Mitsubishi Corp. ended their 21-year investment in January 2005. Both held a combined 15.8% stake in Proton, half of which was sold to Khazanah, boosting the latter’s stake in Proton to 42.7%.
Kyodo News added that Proton’s future has not been rosy as its market share continues to shrink. It once held an 80% share in the domestic market, mainly due to the government imposing excessive taxes on foreign-made cars in order to give Proton a boost.
Import duties, however, are coming down as the government opens up to competition. The move has cut Proton’s market share to 40%, the report said, adding that the automaker is also bleeding financially, reporting a second quarterly loss of 154.3 million ringgit for the three-month period to the end of 30 September, compared with a 198.9 million ringgit profit for the same period in 2004.
Investors had pinned their hopes on Proton’s survival on a joint venture with Volkswagen, Kyodo News said.
