Malaysia’s Proton faces uphill climb back to ‘national’ stature

Malaysia’s Proton faces uphill climb back to ‘national’ stature

BANGKOK — Even with support from Zhejiang Geely Holding Group, Malaysian automaker Proton Holdings has a difficult route to travel amid stalling sales at home as well as the duo’s underwhelming brand power abroad.

The Chinese company agreed late last month to buy 49.9% of Proton from DRB-Hicom, letting the Malaysian corporation retain a majority stake and promising to protect Proton’s “national car” status. But the move was seen as Geely taking the lead in overhauling the ailing brand.

Falling out of favor

“They say Proton is my brainchild,” former Prime Minister Mahathir Mohamad wrote in a blog post dated May 25. “Now the child of my brain has been sold.”

“Yes. I am sad,” he wrote. “I can cry.”

Tears or no, the support of a foreign investor had looked like Proton’s only hope. The brand’s sharply deteriorating performance in the last two years has weighed on DRB-Hicom’s books.

The surest indicator of Proton’s decline is its vehicle sales in the domestic market. The company has seen its market share slide since giving up the lead in 2006 to Perodua, a national rival backed by Toyota Motor unit Daihatsu Motor. Proton’s share hit just 12% in 2016, with vehicle sales totaling around 72,000 units.

The sales slump has dealt a direct blow to parent DRB-Hicom. The Malaysian company posted a loss of 1 billion ringgit ($234 million at current rates) for the automotive segment, of which Proton is a pillar, in the year ended March 2016. This marked a plunge from the year-earlier 64 million ringgit profit. And for the year ended this past March, the segment’s loss topped 950 million ringgit.

DRB-Hicom’s profits from real estate, construction and services businesses were washed away in the red ink from the automotive segment, leading to two straight years of operating losses. The segment has generated losses exceeding 1.6 billion ringgit since the corporation brought Proton under its umbrella in fiscal 2012.

 

HIROSHI KOTANI, Nikkei staff writer