The farce that is the Proton X70

QUESTION TIME | The first thing to remember is that the new Proton X70 is not a Malaysian car, but one produced in China by Geely - and it is over seven months after the X70 was launched in Malaysia and over two years since Geely took a 49 percent stake in Proton. Let me emphasise that - two years later and we don’t have a Malaysian X70.

The X70 appears to be Proton Bhd’s saviour by making it profitable again, but so far it is farcical to think a Malaysian car is doing this. Even after it is “manufactured” in Malaysia, most likely next year, it would be pretty much a rebadged car and it would be many years before it becomes truly Malaysian.

Right now, it is a case of “Malaysia Truly Asia”, our tourism slogan, but “Asia” because of China now, and Japan before that. Coincidentally, the tourism programme is also going to focus a lot on China, attracting residents from the country to Malaysia, hopefully for substantial profit here.

Unfortunately, the similarity ends there. In the sad case of the Proton X70, the people who lose out are Malaysians who pay as much as two-thirds more for cars that are essentially rebadged Geely Boyue models which retail in China for between 100,000 and 160,000 yuan or RM60,000-RM100,000. Indicative prices are given in this article from the South China Morning Post.

The range which sells in China that is comparable to those in Malaysia is probably RM60,000 to RM80,000, after checking the specifications of the models. The equivalent in Malaysia sells for between RM100,000 and RM120,000 roughly, a 50-67 percent premium. Even if you include shipping, the costs don’t move much, being perhaps several hundred ringgit per unit.

If we assume that the “Malaysian” Proton X70 pays little or no import taxes, the margin of profit in Malaysia must be pretty hefty, especially considering that the comparable Boyue sells for a significant profit in China at a price a third to two-fifths lower. No wonder Proton is expected to turn around this year without selling a single “Malaysian” X70! This, according to its new China CEO.

Who profits from this diddling of the Malaysian car buyer? Proton, of course, and its two major shareholders - 51 percent shareholder DRB-Hicom controlled by Mahathir (and Najib Razak) crony, tycoon Syed Mokhtar Albukhary (below), and Geely of China.

Over two years ago, in May 2017, when Najib was prime minister, Geely China’s Zhejiang Geely Holding Group Co Ltd took a 49.9 percent stake in Proton Holdings via a convoluted deal which valued the stake at RM770 million. The remaining 50.1 percent is held by DRB-Hicom.

This came with the grant of a licence to manufacture and sell Geely’s Boyue model (NL3) under the "Proton" brand in the right-hand drive markets in “certain Southeast Asian countries for the life cycle of the model”. In other words, just stick the Proton badge on it and sell it. That’s car manufacturing?

What Malaysia should do even at this late stage is to make the country a regional manufacturing hub open to all manufacturers and ditch this thing called the national car. Only in Malaysia does such an animal exist.

This will sort out the problem of what to do with the parts manufacturers in the country if we dismantle the privileged national car industry. Thailand is a manufacturing hub and its car industry is larger than ours, even though we had a head start in 1985 when Proton started “manufacturing” rebadged cars from Mitsubishi here.

Instead, we are doing another re-badging operation, this time with China’s Geely, a low-cost manufacturer, but which is still given substantial tariff protection locally. In effect, Geely is ripping off Malaysians who are paying 50-67 percent higher prices for the Boyue (below), re-badged as the X70, than it costs in China.

The benefits go directly into the pockets of DRB-Hicom and Geely, the shareholders of Proton, previously a government-owned company. DRB-Hicom’s controlling shareholder, well-connected tycoon Syed Mokhtar Albukhary, could have made as much as RM3.5 billion, as I explained here, by doing the deal with Geely.

Syed Mokhtar is not only closely connected to Mahathir - who still operates a posh office at Syed Mohktar’s foundation near the KL Botanical Gardens - but was close to Najib Razak, during whose time the Geely deal was done and approved. The deal has subsequently been endorsed by Mahathir.

Syed Mokhtar, through DRB-Hicom, gets to monetise valuable land within the old Proton, which was not included in the deal. Rightfully, since it is no longer going to be used for the original purpose, it should be returned to the government. The land was alienated to Proton when it was government-owned at a low price to set up Proton’s facilities, which have been transferred to a new site in Tanjong Malim.

Further, Syed Mokhtar also ends up owning a 49 percent stake in the UK Lotus company - not Proton. Geely owns the controlling stake of 51 percent. Lotus was previously owned by Proton.

Also, Proton continues to benefit from grants for “research and development” which can be massive, amounting to over RM1 billion a year. All these now will go to the restructured Proton shareholders as if they need more subsidies when their profits are already being heavily subsidised by the Malaysian car-buying public.

This is not to say that I have anything against the Proton X70. This fully imported model from China, because of the high tax for other vehicles, offers the best value for its class.

Geely, which owns Volvo, with the help of Volvo technology and design, has come up with a great, cheap product in the Boyue (X70), which should be a lot cheaper in Malaysia. Put it another way, I have a choice of buying many cheap models of cars from around the world if we had no national cars, including the Boyue.

In 1988, 31 years ago, I bought a Proton Saga for the same reason that I am buying the X70 now - the best value for money in its class because of the tax breaks it gets. We could be paying a third to two-fifths less for cars from around the world if we did not have this ridiculous import tax that burdens all car buyers in Malaysia.

After all, for most of us, the car is the most expensive item we will end up paying for, after the house, in our lifetimes and our government makes it more expensive for us by subsidising inefficient producers! It won’t change for now - the father of the national car is our prime minister again!

The current government can put much more money or disposable income in the hands of Malaysians - hundreds of billions more over the years - by removing car taxes progressively over, say, five years, instead of putting it in the hands of profiteers who ultimately sell foreign cars anyway. I hope that becomes a future campaign promise.

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P GUNASEGARAM says the Malaysian car industry is now, without doubt, the most inefficient in the world, thanks to government protection. E-mail: t.p.guna@gmail.com. - Mkini