Proton Holdings Bhd chairman Tun Dr Mahathir Mohamad speaks candidly about the national automaker’s product quality and the direction ahead for the auto company.
Proton is marking its 30th anniversary this year. Do you feel the marque could have done better?
It has been 30 years. We have made considerable progress. The first Proton car had only 18% local content. But now, we can have practically 100% local content - design, testing, clay models; everything can be done in-house now. Currently, we are not doing so well, for various reasons. Now, we want to change the image of Proton. It is no longer going to be a producer of cheap, sub-standard cars. We want to produce cars that can be sold all over the world, and conform to all standards including European standards. At the moment, we depend a lot on our local market. If the foreign markets have restrictions with regards to technology - then we will have to achieve that technology. We will introduce new models next year, and they will be very different from the old Proton cars.
Proton will be launching new models. How important is it for Proton to get quality issues sorted out before the cars are launched?
Our system has changed. Nowadays, the quality is determined in the plant itself. Previously, you produce in the plant; at the end of it, you check for quality. Now, we have quality stations. After a certain point, stop and check quality. If it is not right, stop the whole line. Previously, we test one car in 40. Now, we test every car. Every car that comes from the line must be driven to see whether there are any defects. If any car reports something wrong, they send back the car. They not only repair the car, but also find out how and where was the mistake made? Where was the part that caused the problem? We go to the line to make sure that kind of thing does not happen again. But sometimes, people will report getting bad cars. I don’t know why. We try to - for some of these - do exchanges or buy back.
How important is the collaboration with Suzuki?
We need technology partners which are suitable for us. We don’t want technology partners who may practically take over the company. This is a very Malaysian company. I think Suzuki will be providing certain technologies that Proton does not have now. We need to have some expertise with regards to smaller cars. We are not thinking just about the Malaysian market or competing with Perodua. We want to produce Malaysian cars which can be exported. It will not be a pure Suzuki car. Components or parts may come from Suzuki, but we will build and design our own car which will be sold in Malaysia and also foreign markets. So, we are not directly competing with Perodua.
What about proposed partnerhsips and the joint venture to build Indonesia’s national car?
People are coming to us - to partner with us - to ask us to set up auto plants in their countries. There are so many suitors - many people want to do joint ventures with us. If Proton is such a bad company, why do they come? On the Indonesian proposal, we have worked out - what we have to do and contribute and vice versa. They have bought a plant and we have to design the car. There will be a joint venture in Indonesia to produce an Indonesian car, but Proton will also enter the market to sell Proton cars.
How about the local input – for example, design and engineering?
The mistake in the past was not to give them (our engineers) the jobs. Because even in the management - they feel sometimes our engineers were not competent. Today, the policy is our engineers must do things themselves, learn about everything. If we have to send them abroad, we send them abroad. Our engineers are very competent. We learn from our mistakes. Our new car - it will be fully tested. Not like the Preve. For one whole year, we could not even sell a single Preve because it was so bad; every thing break down and all that. We had to correct all those things. So, now - people are buying - you see a lot of Preve cars on the road. Believe me, our engineers are very good. I am very proud of them. They work very hard, until late at night. There is a new spirit among them. They want to compete, succeed and produce good cars.
Can you talk about the design of the new car (Perdana)?
The new design - we invited a lot of vendors, and foreign and local visitors. When we take off the cover - wow! That is the reaction we get. Syed Mokhtar (referring to tycoon Tan Sri Syed Mokhtar Al-Bukhary) has acquired an aircraft company - which also has the capacity to design cars. So they are also working with us. So, everything is being brought in to help Proton to produce quality cars. You see, they (Proton engineers) have the capacity and the skills. But they were not asked to. The easy way out is to farm it to somebody else. For example, the car designed by Italdesign Giugiaro - we spent a lot of money. Now, we do ourself.
How about hybrids?
Actually, our hybrid cars still cannot meet our expectations. We are not ready to market or mass produce them. We are still in the process of research and development. But we believe the future is in electric cars. The problem is the battery cost, which is high. For example, an electric Iriz would cost up to twice as much. So, we think that Malaysians would not be so interested. As such, we need to look at foreign markets. I can claim we have the best electric car. We can go as high as 313km per charge. But if we sell here at RM100,000 – people may not accept. In Europe, governments subsidise. In England, they give £5,000 (RM29,333) per electric car. Americans and China also have subsidies. In Malaysia, the government is not willing yet to subsidise. I drove Jokowi in an electric car. (In February 2015, Dr Mahathir had driven Indonesian President Joko Widodo on a three-lap spin in an electric Iriz at Proton’s Centre of Excellence).
How about government assistance for Proton?
I don’t want to comment about the Government’s role. But I think we will have to fight our own battles. For example, Europe sets high emission standards and we have not achieved that. So, we will do everything possible to meet the conditions in those countries. Previously, the emission standard was not so high. We exported about 400,000 cars. Our total production and sales is about four million cars - so, we were able to export 10%. Development costs is a problem. to develop new engines can cost RM1.8bil. We are not like the giant multinationals – RM1.8bil is nothing to them. They can spend US$5bil (RM6.76bil) to develop an electric vehicle (EV). Here, we spent RM400mil. But we also achieved (produce EV), although they spent more money. We know how to keep costs low. For example, reducing the cost of development by 50%. That is not easy to do. The cost of development for a new car is very high. Normally, it is from RM650mil to RM1.8bil. But we have reduced this to less than half. We find ways. For example, in the past, they project they will 300,000 units per model. So, they ordered dies meant for 500,000 cars. that is expensive. Today, we see our cars may sell 150,000 units at the end of it life. We use a different method of forming. Instead of stamping fast (very hard) - but we don’t need to be fast because we are not producing that much. So, we use a new system which use compressor and hydraulics, etc. Same product, but using slower way of production, at a much lower price. There are many things we studied, and we decided the old ways of doing things are not suitable for us.
The National Automotive Policy (NAP) – has it hurt or benefited Proton?
It has not benefited us at all. It actually supports imports rather than local industry. Recently, Madani (referring to Malaysia Automotive Institute CEO Mohamad Madani Sahari) said competition is good. Well, competition is good between people of the same size. When you ask a midget to compete with a giant, it is not going to work. You ask us to compete with Toyota, Mercedes-Benz, BMW or even Korean cars – we cannot compete. Our base is mainly here. So, we lose out in foreign markets and also, the local market.
Proton has always been close to your heart. Why?
It is a very big step forward in terms of our industrialisation. At one time, Proton was very profitable. It had cash reserves of RM4bil. It could build Tanjung Malim without asking for any help. People may not say it is a success. To me, it is a success and I am very proud of it. That is why, when I was retiring as prime minister, I asked to be advisor to Proton.
Were you always closely or directly involved in the decision-making in Proton, even when you were prime minister?
Not as much as I wanted to. But today, every Tuesday, I sit with the management – I am directly involved. Even to the point of test driving all the cars. Every car that is produced and new models, modifications – I test myself. I drive on the track, and also in town, to see whether the cars meet my expectations.
Your experiences – as prime minister and running a country – is different from running a company like this?
I think I approach things the same way as when I was prime minister. As a doctor, I used to cure people. You must know what the disease is, and the cause. So, I go through the same process. If there is any breakdown or the car catches fire, I want to know why and can it be corrected. We must produce cars not because the engineers think it is good but also because marketing people say we can sell the car.
How long do you plan to continue to work?
As long as I am able. As long as I can still walk, talk, give ideas. Unless the owner (DRB-Hicom Bhd) sack me... I don’t know lah. I enjoy it (test driving cars). Even 90-year-old people can test drive cars. It is fun for me. I look forward to them. I come here, usually on Tuesday. I sit down with all the managers, and have long discussions and briefings on every aspect of the business – quality, production, design, engineering, new models. Some of the work - before, they like to farm it out to other companies. But now, I insist we do it ourselves.
Where do you see Proton in the next five to 10 years?
We think in two to three years, we will have a turn-around. Our expectation is that these new Proton models will be very well accepted. For high end cars – Nissan has Infiniti, Toyota has Lexus. The Perdana will be our high end car. In terms of volume, we want to produce up to 200,000 units per year. We are concentrating also on export markets. For example, in Indonesia, they like seven-seaters. In Europe, they like manual transmission cars. We will produce cars to fit the market. At the same time, we are going to produce reconditioned Proton cars – not for this market; for exports - so there will be secondhand value. We already have the capacity to produce left-hand drive (LHD) units for the Preve, Persona and Suprima. The LHD market is bigger than the right-hand drive market. We also bought the Petronas engine, which we are installing in our cars.