Sales of Malaysia’s national carmaker Proton are booming, with its market share in the country reaching 27.3 % in February, hot on the heels of another national carmaker, Produa’s 38.8 %. This is not a single month irregularity; for the full year 2020, the rate is 20.5%. For the full year 2020, the share is 20.5%, almost doubling in just two years from a record low of 10.8% in 2018. This is the first time in seven years that the market share has recovered to the 20% level.
The turning point of the turnaround offensive was a capital/business alliance with a Chinese manufacturer: in September 2017, the company accepted a 49.9% stake from Geely Automobile’s parent company and began importing the right-hand drive version of the X70 SUV, which it produces and sells in China, at the end of 2018. As soon as this became a hit, the company switched to domestic assembly in Malaysia at the end of 2019, and introduced an additional small SUV, the X50, in September 2020.
Even in Malaysia, where small passenger cars are the main seller, SUVs have become increasingly popular in recent years. Japanese cars have been strong in this field, but Proton took full advantage of the mass production effect of Geely and the preferential excise tax treatment given to national cars and attacked the market with a price that was about 40% lower.
At a time of great change in the automobile industry, there was no possibility for Proton to survive in the future without the backing of foreign capital. In the past, Malaysia had a policy called Look East, which was to learn from the collectivism and work ethic of Japan and Korea. Now, this look east ended up in China instead of Japan and Korea. The resulting loss of market share for Japanese cars is a clear reflection of the changing industrial power structure in Asia.
Geely is not only targeting the market of Malaysia, which has a population of 32 million and 600,000 vehicles per year. The company has invested its own financial, development, and marketing resources to position Proton as an export base for the Southeast Asian market. However, it is not clear whether Malaysia, a country with high labor costs that will soon join the ranks of developed countries, is suitable for this task.
If the Malaysian-Chinese alliance is able to change the market map in the region, where Japanese cars hold 80% of the market share, led by Thailand and Indonesia, it will certainly change the balance of power in the Asian automobile industry.
Source: The Nikkei
PSR Analysis: Malaysia was one of the first countries in Southeast Asia to tackle domestically produced automobiles, and its enthusiasm for its own brand is strong. Since its establishment in 1985, Proton has had relationships with many OEMs in other countries, including Mitsubishi, VW, and GM, and is now coming back to life through its partnership with Geely. Proton’s renewed success as a pioneer in Southeast Asia, a region with a strong love for its own country, will give courage not only to Proton but also to many other Southeast Asian brands, notably Vietnam’s VINFAST. It will be of great interest to see how Proton will deepen its cooperation with Geely in the future, as it has a wealth of experience in working with other OEMs.
Although short-term ups and downs due to external factors such as COVID and trade friction between the U.S. and China are inevitable in the future, the four-wheel market in Malaysia will expand in the long run. Compared to Thailand and Indonesia, which already have a mature automotive industry, Malaysia still has a lot of room to grow and develop. Domestic demand is large and the desire to purchase cars is strong, with Japanese cars currently holding a fairly high share of the market. The drastically changing market environment means that even if a brand does not have a large market share at the moment, it will have a chance to gain a large share in a few years.
China’s expansion into Southeast Asia is controversial even in the region. Looking at the past history of the region, both pro-China and anti-China sentiments have swirled strongly in Malaysia. However, it is also true that Southeast Asia is still in need of assistance from other countries, both public and private. In order for automobile brands to survive the fierce market competition in Southeast Asia, there will be a growing tendency to seek collaboration with brands from other countries. Proton’s current situation is a good example of this. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
