Proton chief says RI car program may be too late

Proton chief says RI car program may be too late

By Mitchell Mackey

INDONESIA's national car policy may be 10 years too late,
according to Rashid Rahim, the chief executive officer of
Malaysia's flagship carmaker, Proton.

Speaking in Kuala Lumpur earlier this month, Rashid said
Proton -- which has now been in the market for 10 years -- is
fighting aggressively for its survival in the fiercely-
competitive international car market.

"We know how difficult it is to build a car company and the
future for us is going to be very challenging," Rashid said.

"Indonesia's car companies will face similar challenges and
they are not as far advanced as we are because they are only now
starting," he said.

Proton was established with a large degree of state protection
as part of a government policy to encourage the development of
the Malaysian automotive industry.

Similarly, PT Timor Putra Nasional, as the designated
Indonesian "national car" carmaker, has been granted tax
concessions in order to help make the company viable and
encourage further investment in full-vehicle and component-
manufacturing industries.

Although Indonesia has had a number of vehicle assembly
operations producing cars and commercial vehicles for some time,
the government felt that there had been little in the way of
technology transfer.

According to the Minister of Industry and Trade, Tunky
Ariwibowo, the tax concessions given to PT Timor, which is headed
by President Soeharto's youngest son Hutomo Mandala Putra, are
required to help Indonesia develop its automotive industry
further.

In an interview with the Straits Times, Tunky said: "We have
to cooperate with someone who is really willing to give the
technology and provide everything in order for us to develop our
own technology and industry.

"The Japanese have been here since the early 1970s.

"Everybody knows the developments we have had so far -- not
enough attention has been given to developing support
industries."

While PT Timor may help develop the necessary infrastructure
in the short term, the progressive reduction in tariff
protection, as Proton is now finding, may effect the long-term
survival of Indonesia's car industry.

Proton acknowledges that the design and development of its own
cars is an essential but challenging goal.

"We have to have our own design and engineering capabilities
and to do this, we need volume sales in export markets and that
is very difficult as we are competing against very big
international players," Rashid said.

"We are developing a niche strategy, looking for opportunities
in markets around the world where we may not have to compete
directly against the international car companies."

A major investment program is currently underway which will
double Proton's production capacity to more than 700,000 cars.

A new state-of-the-art factory, called Proton City, is being
built near Kuala Lumpur.

Rashid said that as the Malaysian market could account for
only half of the company's production, the export campaign must
be successful.

However, Proton's product lineup makes it difficult to be
truly internationally competitive.

Strategic alliances with Mitsubishi and Citroen have resulted
in the conversion of vehicle platforms from those companies into
Proton products, such as the Mitsubishi Lancer, which is
manufactured in Malaysia as the Proton Wira.

However, Proton is at least two years behind the new model
cycles of Mitsubishi and Citroen.

The new-generation Lancer is now on sale in most developed
markets but it will be at least another year before the Proton
version is available.

The company also continues to rely heavily on imported
components, primarily transmissions and engines, which come
mainly from Japan.

Likewise, PT Timor, with its relationship with Kia Motors Corp
of South Korea, could face the same problems.

The design and development of competitive passenger cars
requires massive investments that even well-established, medium-
size carmakers such as Volvo and Subaru find difficult to afford.

So far, Proton is yet to establish a significant presence in
Indonesia.

About 750 Proton Saga sedans are being operated as taxis in
Jakarta as part of a trade agreement which involves Malaysia
buying aircraft from the Bandung-based PT Industri Pesawat
Terbang Nusantara (IPTN).

Proton is investigating the economics of establishing a
vehicle assembly operation in Jakarta. However, a decision is not
expected for some time.