- 2018-10-18
Geely may acquire Proton, Malaysia's largest car company
The future of the second joint venture in China is still uncertain. Proton's desire to enter the Chinese market for revival may be pinned on the acquisition by Geely.
Geely may complete another international acquisition and enter the ASEAN market dominated by Japanese car companies.
According to reports, in the queue of companies interested in bidding for Proton Motors in Malaysia, China Geely Holding Group has already walked ahead of Renault Motors and PSA Group, and is expected to acquire a 51% stake in Proton Motors.
Malaysia’s own brand, Proton, was established in 1983 under the leadership of the government. Proton is the abbreviation of Perusahaan Otomobil Nasional Berhad in Malaysian, which means "National Motor Co., Ltd.".
Although the company's first model "Proton Saga" was only an OEM product of Japan's Mitsubishi Corporation, then Prime Minister Mahathir Bin Mohamad gave it a high evaluation, calling it "Malaysian National Dignity" symbol of".
Proton Auto developed and produced new models by itself after experiencing early OEM production, and exported them to other countries. In 1996, Proton also acquired Lotus Motors, a famous British sports car brand.
But then the Proton market gradually lost, and there was no improvement for a long time. Since 2014, Proton began to look for foreign acquisitions.
On September 28, 2016, in order to alleviate Proton’s huge debts due, Proton’s parent company, DRB-HICOM, Malaysia’s multi-heavy industry group, announced that it would sell at least 50% of its shares in Proton, Skoda, Suzuki, and Renault. , Nissan, Peugeot Citroen, and China’s Geely Auto are among its negotiation targets.
DRB-HICOM has announced three principles for Proton's search for an acquirer: first, strategic complementarity (both parties jointly develop Southeast Asia and the global market), second, complementary operations (complementary advantages in both products, structures, etc.), and third, cultural complementarity.
The winning bidder will also get three benefits: First, for domestic market share, Malaysia imposes high tariffs on imported cars to protect local automakers; secondly, it can produce cars for the Southeast Asian market through Proton’s factories. Products; finally, you can get the world-renowned racing brand Lotus.
After the 2017 Spring Festival, the due diligence for the acquisition of the majority of Proton's shares is nearing completion. The next step will be to submit a bidding plan (including price, implementation steps, business plan, product planning, etc.) based on the results of the due diligence as soon as possible.
It is reported that Geely is mainly interested in the Proton plant in Malaysia, which has an annual production capacity of 600,000 cars and the ability to produce right-hand drive cars. Although Geely’s Volvo brand also produces right-hand drive cars, the Chinese company’s eponymous brand only produces left-hand drive cars.
In Asian markets such as India, Pakistan and Bangladesh, more than 8 million right-hand drive cars are sold each year. According to people familiar with Geely’s strategy, Geely wants to enter these markets.
Companies House documents show that in the 12 months ended March 31, 2016, Lotus (including the engineering department that sold sports car technology to other companies) recorded a loss of 27.6 million pounds, compared with 3900 the previous year. The loss of ten thousand pounds has narrowed. Due to supply chain issues and the delay in launching the Evora 400 model in the United States, Lotus sales fell by 242 to 1,584.
Although Geely is eager to use Lotus' technology to improve the lightweight of cars, the Chinese company may not necessarily include the sports car brand in this transaction.
A person who listened to the relevant discussion briefing said that after the transaction is completed, DRB-Hicom may retain part of Proton's equity, although Geely hopes to obtain a controlling stake through the transaction.
Proton has denied rumors that it has selected a foreign partner, saying that the process of finding a partner is "complicated and time-consuming," but added that it will be completed "in the first half of this year."
Proton did not respond to reporters' requests for comment.
Geely Automobile is the fastest growing automobile brand in China in recent years. The acquisition of Sweden's Volvo by Geely Automobile is the most successful international cooperation case in recent years. Proton Automobile definitely sees this. It can be said that Geely can satisfy the capital, technology and market that Proton currently lacks.
As early as 2005, Geely officially signed a cooperation agreement with the IGC Group in Kuala Lumpur, Malaysia on the complete vehicle project and the CKD project, but the plant construction plan was forced to terminate because of the Malaysian automotive industry policy. Malaysia’s concern at the time was that the price of cars from China was too low to seize Proton’s original market share.
Ten years later, Geely is no longer the Geely it used to be, and Proton is no longer the Proton it used to be.
Mahathir believes that Proton needs to rely on the huge Chinese market if it wants to realize its revival. Therefore, since he became the chairman of Proton Group in May 2014, he began to visit China frequently to find cooperation opportunities. At that time, he also contacted Geely Automobile to discuss the possibility of cooperation.
In fact, as early as 2006, Proton cooperated with China's youth car to launch the "Lotus car" brand, but due to poor management, Lotus car announced the suspension of production in 2015. Proton's first joint venture in China ended in failure.
But in 2015, Proton Motors, Lotus Motors International and Guangdong Dongguan Jinxing Heavy Industry signed a 40%: 10%: 50% joint venture agreement to establish the "Venus Route Motors Co., Ltd.", hoping to make a comeback in China.
However, as of February 4, 2017, Venus Routes only passed the environmental assessment report of the production base of the Fujian Provincial Department of Environmental Protection, and this automobile joint venture project has not been approved by the government.
The future of the second joint venture in China is still uncertain. Proton’s desire to enter the Chinese market for revival may be pinned on the acquisition by Geely.
In 2015, Proton also discussed the possibility of establishing an ASEAN automobile production hub in Malaysia with Geely Automobile. The Malaysian side expressed the hope that Geely can introduce research and development technology into Malaysia and integrate the technologies of China, Switzerland and Malaysia. As one of the ASEAN member states, Malaysia is the bridgehead for Chinese brands to enter ASEAN. If it can successfully bid for Proton, Geely will obtain Proton's production line in Malaysia, so that its cars can enter the ASEAN common market with 623 million people without tariffs.
At present, Japanese cars account for over 70% of the market share in Southeast Asia. If Geely can successfully acquire Proton this time, it may challenge the strong position of Japanese car companies in this region.