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Proton In Search Of The Right Partner

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KUALA LUMPUR (Bernama) — Remember the “snakes and ladder” game? A bad throw of the dice and the player would have to start all over again.

This time, it is about the national car, Proton, and as destiny has it, it is back to square one. It is back to rebadging the Honda Accord for its Perdana model, while the Inspira is a Mitsubishi Lancer in everything but name.

The state it is in now reflects the original criticism that a national car company in Malaysia does not have the economies of scale to invest in research and development and to amortise the costs in a small domestic market. As reported by The Edge weekly, the PSA Peugeot Citroen group is interested in Proton.

Datuk Seri Idris Jala, as leader of the government-appointed Proton rescue team, was in Paris some weeks ago to meet with the French group. However, the managers at Proton are generally not in favour of the PSA group’s bid.

This is to be expected whenever a takeover bid looms. Also, the perception that the Proton culture is one that rejects changes is very credible. When a company is targeted for acquisition, its employees will not be happy. Given a chance, most of its managers will reject the change. That is one of the reasons why the VW deal to acquire a controlling stake in Proton was aborted at the last minute.

When the government last month disbursed the RM1.5 billion soft loan to Proton, it set out its terms and conditions, including the sale of a controlling stake to a technology-rich car company that desires an entry into the ASEAN market.

The irony of Proton is that its first partner, Mitsubishi, was not the one the national carmaker had initially targeted as partner. The urban legend is that Nissan already had been shortlisted as Proton’s partner when suddenly, from the back of the field, Mitsubishi Motor Corporation (MMC) charged through to secure the partnership with Proton.

Even more ironic is that, today, MMC itself is in moral hazard and financial difficulty because it had fudged its domestic fuel efficiency data for its 660cc Kei-class mini cars.

ASEAN as a regional car market is controlled by Japanese car brands, namely Toyota, Honda and Nissan. Mitsubishi is strong in Indonesia but not elsewhere.

None of the top three Japanese car companies will be interested in having Proton as an export-oriented partner because this will disrupt their captive markets in Indonesia, Thailand and Malaysia.

The companies that will really want Proton as a partner for Malaysia and the ASEAN markets are brands that do not have an ASEAN presence and desire to have a significant share in the regional bloc.

This will include European marques such as PSA Peugeot Group and the Renault-Nissan Alliance; South Korean’s Hyundai/Kia chaebol; and China brands such as Great Wall Motor and SAIC’s Roewe.

On the outside is Fiat Chrysler Automobiles (FCA), whose Chief Executive Officer Sergio Marchionne is convinced that economies of scale demand that the world car market consolidate to four or five major car brands. He has eyes only for merging with GM, even though GM CEO, Mary Barra, has rebuffed his overtures. Pity that FCA and Marchionne have scant interest in ASEAN.

What about the South Korean Hyundai/Kia group? It would seem that they should be interested in an ASEAN market using Proton since – except for a local assembly plant in Kulim, Kedah – they have not invested much in manufacturing activities in ASEAN and will eagerly eye a share in the region.

But as we are talking about Proton, there are bigger things brewing. It looks like that the entire car industry is on the cusp of a disruptive change. Think of the car replacing horses. Honda is thinking about launching autonomous cars by 2020 in the United States. Nissan is thinking about launching its self-driving car in the United Kingdom next year.

Toyota and Honda lead the way in patents for autonomous cars. Tesla is behind, according to a Reuter-Thomson study on autonomous car patents.

In the US, car companies are setting their eyes on cars with autonomous driving capability, also by 2020. Ford, Volvo, Google, Uber and Lyft have formed the Self-Driving Coalition for Safer Streets.

Honda has its own track at a special testing facility near San Francisco. Called the GoMentum Station, the track has 20 miles of “city-like roadway grids” and “urban infrastructure”, creating a realistic testing environment that does not require putting a prototype product on public roads.

Honda is also clear that this is not just an experiment. “This testing programme is aligned with the company’s goal to introduce automated driving technologies around 2020,” Honda USA said in a statement last week.

In the UK, the government will table the Modern Transport Bill to create the legal framework for autonomous or self-driving cars. The automotive industry recognises that it is the legal framework that is lagging behind the technology and the UK government also wants to be ahead in the autonomous car race.

In seeking the correct partner for Proton, the government should also position itself for a phased introduction of autonomous cars. There is a fortunate convergence in energy efficient vehicles, plug-in hybrids, electric vehicles and autonomous cars.

All the autonomous cars that are in the works, including Honda C-RV’s upcoming P-HEV, are based either on P-HEVs or full electric cars. When Malaysia reviews its 2014 National Automotive Policy come 2020, autonomous cars will be on the menu if the Malaysia Automotive Institute, an agency under the Ministry of International Trade and Industry, maintains its engagement and responsiveness with the automotive industry.

For context, my first job immediately after graduating in 1980 was with the Business Times as a cadet journalist. A few years later, then prime minister, Tun Dr Mahathir Mohamad, announced the national car project in partnership with Proton and I was among the journalists invited to test drive the Proton Saga, the rebadged Mitsubishi Lancer.

(Yamin Vong is an automotive industry columnist.)



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