Proton optimistic it will survive liberalization of automotive market
Proton optimistic it will survive liberalization of automotive market
KUALA LUMPUR (AFX-ASIA): Perusahaan Otomobil Nasional Bhd (Proton) is optimistic that it will survive greater competition and emerge as a major player in the automotive industry when the market is liberalized under the ASEAN Free Trade Area (AFTA) in 2005, Proton chief executive officer Mahaleel Ariff said.
Quoted in the online Business Times, Mahaleel said the ASEAN region has a market of 500 million potential buyers which is expected to grow at a rate of 6 percent per year, while the ratio of population to cars is currently 30-to-1 compared with a 2-to-1 in developed countries.
He said the key to doing business in the automotive industry is to develop and innovate on engine and transmissions, and Proton is spending 43 percent of its total manufacturing costs on engine and transmission compared with the global industry average of 26 percent.
Proton needs to develop its own engine and transmission to lower manufacturing costs to at least 28 percent, if not better, and the company is preparing itself for the challenges of market liberalization under AFTA, Mahaleel said.
Mahaleel said to achieve economies of scale, Proton needs to generate a volume of 160,000 to 260,000 engines a year and Proton has also allocated more funds for research and development to ensure it will manufacture its own engine but save on labor costs.
The Proton group has about 1,600 research and development engineers, about 20 percent of its workforce, and it plans to increase its engineers to 1, 900-2,000 soon.
Mahaleel said the benefits of research and development are evident in the design of its latest model Waja, which Proton spent 128 million ringgit to design.
The cost could have escalated to 480 million ringgit if the research and development had been subcontracted to other automotive designers, the report said.
Mahaleel also said Proton should see better earnings for the year to March.