Will Geely’s role in Proton impact Bumi vendors, asks expert

PETALING JAYA: In the chase for global prominence, will the acquisition of Proton by Zhejiang Geely Holding Group lay to rest the Bumiputera preferential policies in the local car market?

That is the question posed by economics expert and senior fellow at Singapore’s Iseas-Yusof Ishak Institute, Tham Siew Yean.

“For Proton, the leap to a global market will require it to follow global sourcing strategies that characterise all global car companies.

“This may spell the end of both Bumiputera and non-Bumiputera vendors that currently supply parts and components to Proton, and which are disadvantaged by scale,” she said, referring to the local sourcing policies in place for the past four decades.

Tham, who is also adjunct professor with Universiti Kebangsaan Malaysia (UKM), said Proton will also need to learn from another Chinese auto maker, Chery, that entered the Malaysian market some years ago.

“From the experience of Chery’s operations in Malaysia, we know little localisation has taken place.

“Instead, parts and components for locally assembled cars are mostly imported from China,” she said, adding it was no surprise as the practice was similar to the preference of other Chinese investments in Malaysia, where inputs, technology and talent were all imported from China for local production.

“The experience of these companies indicate that scale, speed and costs matter the most for Chinese firms while adaptation to local production needs and culture are of secondary importance.”

Tham, however, contended that Geely will be able to do what other partners have failed with respect to Proton.

“Geely is well placed to bring new technology into Proton as its acquisition of Volvo in 2010 enabled it to use the latter’s research-and-development advantage to become the seventh largest car maker in the highly competitive Chinese car market.

“Its purchase of 51% of Lotus from Proton will allow it to synergise between Volvo and Lotus technologies for new developments,” she said.

She added that Geely also would provide the expanded market that Proton needed to be globally competitive.

Geely, she said, reportedly sold 1.3 million units globally in 2016, operating 16 production facilities, seven design studios, and five research and development centres. -FMT