Proton and Geely has signed a Heads of Agreement to set up a joint-venture in which both parties have equal equity. This joint venture will aim to set up a production facility in China to assemble Proton vehicles as well as develop a dealership network to market the Proton range in China. Both parties target to incorporate the JV within the first half of 2019, subject to obtaining all regulatory approvals.
This is by far the best opportunity for Proton to sell its vehicles in the world’s largest automobile market by virtue of Geely’s vested interest in the Proton brand with its 49.9% share in the company; Proton’s success in China is Geely’s success. The portfolio of cars for China will primarily come from existing Geely platforms, although the external design of the vehicles will be undertaken by Proton. The agreement also provides for existing Proton platforms that are found suitable to be developed into models for the Chinese market.
DRB-HICOM Group Managing Director, Dato’ Sri Syed Faisal Albar says, Geely’s entry as a strategic partner to Proton has paved an easier route for Proton’s entry into the lucrative Chinese market. “Clearly with Geely on board, Proton’s route into China has become more tenable. Part of Geely’s role is to secure the manufacturing licenses and regulatory approvals required for such a venture under China’s regulations. Geely will also identify a suitable location where the manufacturing facility is to be based”, says Syed Faisal.
Syed Faisal added that existing Proton component vendors that have quality and a competitive edge may also be considered as suppliers for the new JV company, which is in line with the Government of Malaysia’s aim to have Malaysian component makers venture into the Chinese market. Prime Minister Tun Mahathir Mohamad had lamented previously the lack of Malaysian car exports into regional markets, despite Japanese, Korean and Chinese brands making their way onto Malaysian shores.
China’s passenger car sales have grown tremendously over the last 10 years. In 2008, 6.76 million passenger cars were sold in China, but it has grown to over 24 million units in 2017. With a car market of this magnitude, there is still room for Proton’s presence without it significantly affecting Geely’s market.
Geely is a clear leader, being the first privately-owned Chinese carmaker to sell over 1 million units domestically in a calendar year. In 2017, it sold more than 1.24 million units, carving out a 5.06% market share. In the first six months of 2018, Geely moved an average of over 125,000 units of its models a month, with the Boyue SUV passing the 20,000 mark every month except in January, when more than 30,000 Boyue SUVs were sold.
The localised version of the Boyue SUV is planned for a fourth quarter launch in Malaysia as Proton’s first-ever SUV.