Malaysia's Proton seeks to revive exports

Malaysia's Proton seeks to revive exports

Eileen Ng Agence France-Presse Tanjung malim, Malaysia

Malaysian national carmaker Proton's new 1.52-billion-ringgit (US$400 million) manufacturing plant was given the thumbs up from Britain's top vehicle agency on Monday, paving the way for the firm to ship new models to Europe.

The hi-tech factory in Tanjung Malim north of Kuala Lumpur was awarded the Conformity of Production (COP) certificate from Britain's Vehicle Certification Agency less than seven months after it had begun operations.

The approval will be a shot in the arm for the automaker which is seeking to boost exports that currently comprise just a tiny fraction of its total sales.

"Receiving the recognition from a leading European approval and quality management system certification body is validation of the quality standards which we have established in Tanjung Malim," said the plant's chief executive Kamarulzaman Darus.

"The COP certification also paves the way for the export of current and future models from Tanjung Malim as Proton expands across the global market."

The plant currently rolls out only the 1.6-liter Gen.2 model launched in February, the first of a new generation of Proton cars fitted with its own Campro engine. Older models are produced in its factory in central Selangor state.

Kamarulzaman said production at Tanjung Malim would be ramped up to two shifts by October to double capacity to around 9,000 units a month by early next year.

Two more new models -- both smaller cars -- will be rolled out, one later this year and another early next year, which will bring the plant to its full capacity of 150,000 units annually by the end of 2005, he said.

The COP certification paves the way for new Proton cars to enter Britain, its single largest export market, as well as to the rest of Europe, he said.

Proton has begun shipping the Gen.2 cars to Britain and expects to export a total of 10,000-12,000 units of the model there by the end of its financial year to March 2005, he said.

It also aims to export the car to Singapore this month, Australia next month as well as the Middle East and other Southeast Asian countries, he said.

Exports now account for less than five percent of Proton's earnings, but Kamarulzaman said Proton's new generation of cars would revive sales abroad.

"We are also developing vehicles for the left-hand drive market. Our target is at least 30 percent of production volume will be for the export markets," he added.

Boosting exports is crucial to Proton as its domestic sales have shrunk in the face of increasingly tough competition ahead of market liberalization in 2005 under the Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA).

Proton used to sell six out of 10 new cars in Malaysia but its market share fell from around 60 percent in 2002 to 49 percent last year as sales tumbled to 155,420 units.

Under AFTA, import tariffs for most products in the region were cut to below five percent in the past year. Malaysia obtained a two-year reprieve for its auto industry until 2005 but has said it would defer reducing duties to the required level until 2008.

The government has said it would not extend tariff protection for Proton and has told the carmaker, which has received proposals from three foreign car companies including Britain's MG Rover, to accelerate efforts to form strategic foreign alliances.

Its Japanese partner Mitsubishi Motors withdrew recently and Proton's single largest shareholder, state investment arm Khazanah Nasional, is said to be considering plans to allow a foreign carmaker to hold up to 20 percent of Proton.

Analysts have warned it may be tough to woo a new partner unless the government is willing to trade in its dream of a national car industry for a pragmatic foreign tie-up.