Things are heating up with Proton's quest for foreign partnership - The Coverage Automotive
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Things are heating up with Proton’s quest for foreign partnership

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PETALING JAYA: French manufacturer PSA Group, the company which produces Peugeot and Citroen cars, is making a bid for a stake for Proton Holdings Sdn Bhd, as the local automotive manufacturer seeks foreign help to boost its dwindling sales.

Other manufacturers such as Volkswagen Group and Geely from China, are said to be participating in this process as well. “The bid (by PSA) was made following fruitful talks between PSA and Proton’s delegation in France recently. The VW Group and China’s Geely are also in the bidding process,” a source said.

Reuters reported that PSA was acting as a bidder on its own accord. Malaysia currently hold the top spot of Peugeot total sales in Asean.

Naza Group, the local distributor of Peugeot and Citroen cars, has been linked several times in the past as a serious bidder for Proton.

“However, there is a possibility that the Malaysian counterpart (Naza) could be involved in this transaction with PSA at some point, if all goes well,” he said.

The bid bodes well for PSA’s operation in Asia, when the group targeted a million vehicles to be sold in China and South-East Asia by 2018. During the first half of 2016, sales amounted to 296,507 units, or a decline of 19% on a year-on-year basis.

It is believed that Proton had sent out proposals for the purpose of partnership to approximately 20 carmakers earlier this year. Some carmakers which had responded are Suzuki Motor Corp and Renault SA.

The potential strategic investment by a foreign partner is a key component to compensate the loss making of Proton’s turnaround plans.

In June, the government loaned Proton RM1.25 billion by subscribing to  1.25 billion new redeemable convertible cumulative preference shares (RCCPS). The investment is carried out by Govco Holdings Bhd, which is a part of Minister of Finance Inc.

On Sept. 9, DRB-HICOM announced in a stock exchanged filing that an additional RM250mil in cash would be provided by Jan 31, 2017 as part of a second subscription agreement.

Among the requirements in the arrangement is that within a year’s time, the carmaker must seek and identify a “strategic and renowned partner” which will help in research and development programmes in order to be a competitive player in the international automotive scene.

Potential investors in Proton would have to take into consideration the ramifications of the RCCPS scheme. Among them is that should Govco eventually opt to convert the shares, the Government would end up with a 82.35% stake in Proton, while DRB-Hicom’s stake would be diluted from 100% to 17.65%.

Two of Proton factories in Tanjong Malim and Shah Alam are considered the carmaker’s prized assets for foreign bidders who are keen to perform a large-scale regional expansion. The facilities are considered to be able to produce 400,000 cars every year.

Japanese manufacturers which dominate the market share in the region have already committed substantial investments. For example, UMW Toyota Holdings Sdn Bhd announced that it planned to increase it manufacturing capacity to 100,000 cars per annum with the construction of their new factory in Bukit Raja, Klang in May this year.

Proton’s sales have dropped throughout this year due to a decrease in consumer spending and stricter requirements for auto loans.

For the prior eight months of the year, Proton recorded a sales volume of 44,029 units, a huge decline of 37% compared to 70,113 units during the same period last year.

On the other hand, the carmaker saw improved sales figures for the month of August, owing to the positive response towards the recent launch of its Proton Persona model.

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