Proton revs up for AFTA with ambitious tie-ups but rocky road
\nahead<\/p>\n
Eileen Ng
\nAgence-France Presse
\nKuala Lumpur<\/p>\n
With just over a year left before Malaysia's auto market is
\nforced open under a regional free trade pact, national carmaker
\nProton is aggressively expanding its reach and diversifying its
\nproduct range with two ambitious tie-ups to prepare for greater
\nforeign competition.<\/p>\n
Proton last week inked a letter of intent to acquire a 50
\npercent controlling stake in Italian motorcycle producer MV
\nAugusta Moto SpA, which it said was acknowledged as the \"Ferrari
\nof motorcycles\".<\/p>\n
Proton already controls British sports carmaker Lotus and the
\nAugusta acquisition, if it pushes through, will give added
\nprestige to the Malaysian manufacturer, which started out in 1985
\nwith hand-me-down technology from Mitsubishi of Japan.<\/p>\n
In another move marking a new phase in its 18-year history,
\nProton, long used to a cosy domestic market, also sealed a 16-
\nyear alliance that would pave the way for it to sell engineering
\nexpertise to Iran and access a booming auto market there.<\/p>\n
Under the pact with Automotive Industry Development Company
\n(AIDCO), Proton will supply Malaysian designed and built vehicle
\nplatforms and its own Campro engines as well as assist AIDCO to
\ndevelop research and manufacturing capabilities until 2020.<\/p>\n
AIDCO owns Iran's two top car manufacturers, Iran Khodro and
\nSAIPA Khodro, which jointly control 90 percent of the country's
\nmarket of some 700,000 cars.<\/p>\n
Proton said the Iran deal marked a \"significant drive forward\"
\nin its push to expand and would cut reliance on a domestic market
\nwhere competition is heating up ahead of liberalisation in 2005
\nunder the Association of Southeast Asian Nations (ASEAN) Free
\nTrade Area (AFTA).<\/p>\n
Tariffs on imported cars in Southeast Asia fell below five
\npercent in January under AFTA but Malaysia obtained a two-year
\nreprieve for its auto industry.<\/p>\n
\"From just a car assembler and manufacturer, Proton has been
\npropelled into the ranks of more established global car
\nmanufacturers which have developed and sold their technology
\ncapabilities, in a span of less than two decades,\" a company
\nspokesperson told AFP.<\/p>\n
With the current best-selling model in Iran harking back to
\nthe 1960s and priced at a hefty US$10,000, he said there was huge
\npotential for Proton in helping to develop a new generation of
\ncars there.<\/p>\n
But analysts are not convinced, and most believe a foreign
\npartner is still crucial to Proton's long-term survival.<\/p>\n
Edward Ong, auto analyst at ING Barings, said Proton lacked
\neconomies-of-scale that other major manufacturers enjoy and
\nsuffered from a perception of poor quality and low acceptance
\noverseas.<\/p>\n
With an annual output of under 250,000 cars a year, he noted
\nProton was among very few carmakers with production of below one
\nmillion units.<\/p>\n
\"In the auto industry, it's all about volume. Doing things
\nlike luxury motorcycles is a niche but it's not going to help
\nmuch. They cannot do without a foreign partner,\" Ong said.<\/p>\n
Proton's market share dipped below 40 percent in August and is
\nlikely to erode further under AFTA. Ong said it can expect other
\nforms of government protection when tariff walls come down but
\nwarned this would never make the carmaker competitive.<\/p>\n
The government has said it would impose excise duties on
\nimported cars from January to offset losses in revenues from
\nimport tariffs but has not unveiled details.<\/p>\n
Seow Choong Liang, research chief at K and N Kenanga, said
\nthere were few details on the auto policy and restrictions in
\nIran, and how the deal would benefit Proton.<\/p>\n
\"Proton will have to prove itself when AFTA comes into place
\nand time is running out. It will face a lot of challenges going
\nit alone in an already crowded auto sector,\" he said.<\/p>\n
In a bid to boost sales, Proton recently teamed-up with the
\ncountry's number two bank to offer buyers attractive financing
\nschemes and other services.<\/p>\n
It is pinning hopes on new models to be rolled-out next year
\nfrom its new hi-tech manufacturing plant in Tanjung Malim north
\nof Kuala Lumpur.<\/p>\n
The plant is part of a three-billion-ringgit (US$789 million)
\nauto city modelled after Detroit, that Proton said would cut
\ncosts and double its annual production to 500,000 cars by 2005
\nand to a million by 2010.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/proton-revs-up-for-afta-with-ambitious-tie-ups-but-rocky-road-1447899208",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}