Proton facing financial trouble

Business

ONCE a source of Malaysia’s national pride and centrepiece of the country’s bold strategy towards industrialisation, automaker Proton Holdings is in severe financial trouble and may be sold.
After months of talks, Proton parent DRB-Hicom’s board plans to meet this week to discuss proposals from China’s Zhejiang Geely Holding Group Co and France’s PSA Group, sources told Bloomberg.
DRB-Hicom, a conglomerate controlled by Malaysian billionaire Syed Mokhtar, declined to comment on the sale process.
Proton was founded by former prime minister Dr Mahathir Mohamad in 1983, rolling out its first sedan (Saga) in close collaboration with Japan’s Mitsubishi Motors.
Despite receiving more than US$3 billion in subsidies since its foundation, Proton struggled and in 2012 was privatised to DRM-Hicom.
The sources said Proton was seeking to sell a stake of as much as 51 per cent to a foreign buyer in order to keep factories open and develop new models. For most of its history, Proton benefited from tariffs of as much as 300 per cent on imported cars.
Combined with rules that allowed consumers to spread cheap car loans over as long as nine years, the company was able to establish a dominant position in the Malaysian market.
Yet even with that home-field advantage, Proton’s success proved fleeting.
At the high-water mark of sales in 1993, Proton accounted for 74 per cent of new cars sold in Malaysia.
In 2016, a decade after the government slashed tariffs on foreign-made vehicles as part of its participation in a South-east Asian free-trade pact, its market share dropped to 12.5 per cent.
Aside from tariffs, analysts point to multiple culprits for Proton’s failure to compete with international automakers.

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