Proton acquires Indonesian auto plant, plans foray into China
Proton acquires Indonesian auto plant, plans foray into China
Agence France-Presse, Kuala Lumpur
Malaysia's national carmaker Proton said on Friday it has acquired an auto assembly plant in Indonesia for US$18 million as part of its expansion into Southeast Asia and was making plans to penetrate the huge China market to boost exports.
In a statement, Proton said its unit PT Proton Tracoma Motors would pay $10.3 million to PT Unggul Gunasama Mobil Industri for the plant in Cikarang, near Jakarta, which used to assemble Chrysler cars.
It would also pay $7.8 million to Bank Lippo for the land.
The Indonesian plant provides Proton with its second manufacturing base in the 10-member Association of Southeast Asian Nations (ASEAN), a condition that qualifies the carmaker for full tax breaks under a regional industrial tariff scheme, it said.
"The acquisition of the plant will enable Proton to access not only the Indonesian market but also the ASEAN market, which had a combined total industry volume of 1.5 million vehicles in 2003," it added.
Proton said it now has operations in more than 52 countries, with a total of more than 10,000 employees.
PT Proton Tracoma is a 51:49 joint venture between Proton and Malaysian auto parts maker Tracoma Holdings.
Friday's Business Times quoted insiders as saying that Proton would assemble the low-cost Wira and the new Gen. 2 models at the 50,000 units a year facility in Cikarang, about 90 minutes from Jakarta.
The newspaper said the carmaker also has plants in China and Iran, operated with local partners.
It said Proton was expected to announce plans to expand its China venture to penetrate the world's largest consumer market upon completion of a feasibility study by the year-end.
Kamaruzaman Darus, chief executive of Proton's new plant in Tanjung Malim, was quoted as saying that the China market was extremely challenging due to its size and district autonomy which led to different regulatory bodies and rules.
"China is considered a factory of the world, hence the need to carry out a thorough study before we try to penetrate the market," he said, adding that "something good" would be announced by the year-end on its plans.
The carmaker is rushing to expand to boost exports, which now account for less than five percent of its earnings, to offset shrinking domestic sales due to rising competition ahead of market liberalization in 2005 under the ASEAN Free Trade Area (AFTA).
Set up two decades ago, Proton used to sell six out of every 10 new cars in the country but its market share fell to 49 percent in 2003 and dipped further to 45 percent in the first half of this year as sales tumbled.
Under AFTA, import tariffs for most products in the region were cut to below five percent over the last year. Malaysia obtained a two-year reprieve for its auto industry until 2005 but it recently said it would further defer reducing duties to the required level until 2008.
The government is pushing Proton, which said it had received proposals from three foreign car companies including Britain's MG Rover, to tie-up with foreign auto giants to remain competitive and to penetrate global markets.