Proton tells parts suppliers to cut prices by 20%

KUALA LUMPUR: Proton Holdings Bhd has told its automotive parts suppliers to cut prices by 20%.

This is to reduce Proton’s production costs. It is also to ensure vendors remain competitive, following Proton’s tie-up with China’s Zhejiang Geely Holdings Group Co Ltd.

The call was made by Proton’s Geely-nominated CEO Dr Li Chunrong when he met with Proton vendors last week, The Malaysian Reserve reported today.

Geely bought 49.9% of Proton shares from DRB-Hicom Bhd in May 2017.

Quoting sources, The Malaysian Reserve said Li had said that Proton would work with vendors to help them lower costs and achieve the target.

One of the ways would be by improving economies of scale by reducing the number of model variants, according to one vendor quoted in the report.

A source was quoted as saying vendors felt they could lower prices if Proton could guarantee higher orders, as was being done by Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

The source said Perodua produced approximately 5,000 cars a month and this helped vendors to offer lower prices because they supplied more.

According to the report, representatives of 5,000 Proton vendors raised concerns that Proton, under Geely, would use cheaper parts from China over local parts suppliers.

Proton vendors have enjoyed more than 30 years of basically competition-free business from the national carmaker, and many are worried their business will be affected by Geely’s entrance. Many are unhappy with the 20% price reduction call.

The report quoted Malaysia Automotive Institute CEO Madani Sahari as saying this move should be seen as an opportunity for local vendors to become competitive and be a part of Geely’s global supply chain.

“This is not the first time a Malaysian vehicle manufacturer has entered into a strategic alliance with a foreign partner. Perodua had formed a partnership with Daihatsu Motor Co Ltd more than a decade ago, and we saw the same levels of concern among local vendors supplying to Perodua at that time.

“Today, Perodua holds the biggest share within Malaysia’s passenger vehicle market, with the Perodua Bezza seeing a 95% localisation rate,” Madani was quoted as saying.

According to the report, vendors also raised the issue of delayed payments by Proton. One vendor, for instance, is owed RM5 million in parts delivered and it has been overdue by six months. FMT