Proton's road to China littered with obstacles
Malaysian firm may have trouble finding a partner in a market full of foreign carmakers
Proton, Malaysia's state-owned carmaker, will face a difficult task in achieving its goal of securing a foothold in the Chinese market, say industry players in the mainland.
Proton is in talks with several Chinese carmakers on a possible strategic alliance, but a company spokesman told the South China Morning Post that there was no timetable for reaching any deal. He declined to give further details.
The group hopes to make the Lotus sports car in China and in February last year said it wanted to set up a production plant in Dongguan, in Guangdong province.
However, officials at the China Association of Automobile Manufacturers said finding a China partner with a solid brand name would not be easy as the leading mainland carmakers have already secured stable strategic alliances.
Local carmakers are also winning market share in their own right and now have 26 per cent of the domestic market, up from 2 per cent in 2000, compared with 27 per cent for Japanese brand cars.
Chinese carmakers are also looking offshore to develop their business and do not see markets in Southeast Asia as being attractive export options compared with markets such as Russia and the Middle East.
Proton has faced a bumpy road in recent times. It lost its tie-up with German giant Volkswagen and re-entered an alliance with Japan's Mitsubishi Motor Corp early this year. Mitsubishi is expected to announce a venture with a Chinese manufacturer soon.
Proton's market in Malaysia has fallen to 30 per cent from 57 per cent in 1993, and management sees tying up with a foreign partner as a way of turning business around.
Analysts said Proton would only be able to make an alliance with a second or third-tier carmaker as all the main players in China have overseas partners, which means any deal it does make would not bring enormous positive impacts.
Another concern is the Lotus brand.
'The Lotus car brand is not sound enough and Proton's global performance is not good. It won't be easy for the group to get a position in a fragmented market such as China,' one analyst said.
Most Chinese carmakers see export business as a new profit driver as the domestic market continues to get more competitive.
Carmakers such as Hong Kong-listed Geely Automobile Holdings and Great Wall Motor, or non-listed Chery Automobile which produces the QQ brand of passenger cars, are opening up markets in Southeast Asia and Russia as well as eyeing markets in Europe and the US.
Industry players say Proton wants to pursue a similar business model to Geely, and find an overseas partner with which it can secure market share.
Bai Xufei, secretary of the board of directors at Great Wall, says many Chinese carmakers do not see Southeast Asia as their best bet. Markets such as Thailand, where many global carmakers have had operations for a long time, are seen as difficult to enter by Chinese firms, he said, preferring opportunities in Russia or the Middle East.
Great Wall sells sports utility vehicles and pick-up trucks in Russia, which Mr Bai sees as 'a good starting point for opening up the group's export business'.
'Chinese brand cars are often half the price of Japanese or American cars,' he said.
