Proton Joint Venture in China

Proton Joint Venture in China

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Following a report by Bloomberg news which mentioned that Proton would be signing a joint-venture with a company in China this Friday, the national carmaker has provided some confirmation of the move in a reply to a query by the KLSE.

In the Bloomberg report, it was stated that Proton would be establishing a joint-venture with Gold Star Heavy Manufacturing Ltd in southern Guangdong, China. The report quoted an official of Gold Star as saying that the initial plan is to make car parts at the factory in China and that consideration would be given to assembling whole cars at a later date.

Proton’s official response: “We are presently engaged in final negotiations with the parties concerned with a view to facilitate Proton’s participation in the automotive industry in China. The targetted signing date is this Friday, 11 January 2002, depending on the progress of negotiations.”

This development is not exactly new as, a few years ago, Proton had revealed that it was in discussions with a company in China after a delegation of Malaysian business leaders visited China. It is not clear why it has taken so long for this latest development to occur although one source suggested that there were ‘complications” with the factory status which needed to be resolved in Beijing. It is also possible that Proton was waiting for China’s entry into WTO, which took place a few months back, so as to enjoy easier access into the potentially huge China market.

At this time, it is not known whether the car parts to be made will be for China or for Malaysia although the latter seems likely. In preparation for the coming open market when competition will be great, Proton is urgently looking for ways to bring its production costs down substantially and making the parts in China could be one of the strategies to achieve this.

As for the assembly of cars, this is probably just a thought because getting into the China market is not easy. It’s a large country with many different regions and establishing a sales and service network will be tough. While China’s membership of the WTO has everyone excited about easy entry into that giant market, the reality is that there will remain various issues that impede access.

Besides this new j-v, the other overseas joint-ventures which Proton has had since the early 1990s are in Vietnam and the Philippines. In Vietnam, together with Mitsubishi Motors, Proton established VinaStar Motors and there was a plan to assemble some models there. However, the market has remained depressed and economic progress is slow. So far, only light commercial vehicles supplied by Mitsubishi have been assembled and sold as demand for passenger cars is too low at this time.

From what AUTOWORLD.COM.MY understands, the agreement is such that if passenger car models 1.6 litres and below are to be assembled, then they will originate from Proton.

Proton Pilipinas started off quite well making a small volume of left-hand drive Wiras but some disgreements with the shareholders has seen activity die down in the latter hald of the 1990s.

In recent years, Proton has also announced a “smart partnership” with Hindustan Motors of India. After an enthusiastic announcement and a statement that the marketing study had been done, nothing else has happened after two years. It had also been announced that Proton would jointly develop models with Hindustan. Likewise, there is no further news of the assembly of Proton models in Indonesia which was to have commenced in the middle of last year.

With the diminishing number of months remaining to the removal of preferential duties for Proton (and Perodua), the national carmakers are obviously looking beyond Malaysian borders for their future. Perodua has already charted a course which puts it in a strong position to compete after 2005 and so all eyes are on the Proton strategy.


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