Business News

DRB-Hicom expects to recoup lost margins

Friday, 8 August 2014

DRB-Hicom headquarters in Glenmarie, Shah Alam. Analysts  estimate the Audi business accounted for less than 3% of the company’s profit.

DRB-Hicom headquarters in Glenmarie, Shah Alam. Analysts estimate the Audi business accounted for less than 3% of the company’s profit.

SHAH ALAM: DRB-Hicom Bhd, which is ending its role as wholesaler of Audi vehicles in Malaysia, believes it can recoup some of the lost margins by selling Jeep vehicles and also from higher sales once Audi takes over the wholesale business in Malaysia.

DRB-Hicom senior group director of automotive distribution and manufacturing Datuk Radzaif Mohamed said DRB-Hicom had been informed by Audi AG that the wholesale business would be taken back by the German company but had not been informed of the transfer date.

“We have known all along since 2009 when we signed the agreement that Audi will take over the wholesale business,” he told the media yesterday.

“There is no significant impact because we have planned for it.”

Analysts estimate the Audi business accounted for less that 3% of DRB-Hicom’s profit.

Radzaif felt the financial impact from the termination of the Audi distributorship business would be made back from selling other marques and from a reduction in the advertising and promotion budget of Audi cars which was currently borne by DRB-Hicom.

With the change, Audi will take over growing the sales of its cars in Malaysia and a higher sales volume will mean that DRB-Hicom, which will remain a dealer of the marque, should benefit from higher sales volume.

The other way it will offset that loss is through the sale of Jeep vehicles under an agreement with Chrysler. DRB-Hicom entered into a distributorship agreement with Chyrsler in June to sell four Jeep models in Malaysia.

Radzaif said the sale of Jeep vehicles will start next quarter.

“It’s going to be a lifestyle product,” he said.

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