Proton all revved up for Afta and beyond


  • Business
  • Thursday, 10 Apr 2003

BY B.K. SIDHU and  JAGDEV SINGH SIDHU

A fequently asked question in the motor industry is whether national carmaker Perusahaan Otomobil Nasional Bhd (Proton) is ready for the advent of the Asean Free Trade Area (Afta). 

As far as Proton chief executive officer Tengku Tan Sri Mahaleel Tengku Ariff is concerned, the company is not only ready for Afta but will be expanding in a big way beyond Malaysian shores. 

Tengku Tan Sri Mahaleel Tengku Ariff

According to Mahaleel, the expansion strategy will make Proton a cost-efficient carmaker, which will ensure “profit sustainability.'' 

In a two-hour media briefing yesterday, designed to answer critics and sceptics, Mahaleel said the Proton strategy for survival included: 

  • Developing and manufacturing its own engine which will improve performance of its cars and substantially cut down costs; 

  • Offering small to high-end vehicles of superior quality that are competitively priced; 

  • Having an efficient, customer-focused and the biggest distribution network; and 

  • Expanding into newer market overseas. 

    It is because of all these reasons that Mahaleel is “very upbeat'' about Proton's future. 

    “By then (2005), we will have fresh products. The key then is customer focus....you never know (the response) until you launch a product,'' he said. 

    He also squashed talk that Proton was behind schedule in the development of its new engine. “We are on track for our Campro engine. Our 1.3cc Campo engine is spot-on. Our 1.6cc needs some calibration works,'' Mahaleel said. 

    Proton started work on the Campro engine three years ago which would be produced at Proton's Tanjung Malim plant. The parameters for the engine development are that the cost has to be low; it would have engineering adaptability over the next 10–15 years; and fits the platforms that Proton are designing. 

    “Proton cannot compete (in an Afta environment) if the costs are high and as you know, 30% of the cost of the car comes from the engine. If you don't get your engine cost correct, you cannot sell your car cheaply.'' 

    “The Waja is already cost-competitive but newer models would be benchmarked against the (South) Korean cars. The technology we apply would be much more superior than that of the Koreans. In that sense, I am very upbeat for we know what is coming and what our costs are,'' he added. 

    Besides having its own engine, Mahaleel revealed that Proton had also developed the world's first adaptable platform, and its board had “decided to commercialise it and no one has this yet.'' 

    He stressed that Proton was the only company in Malaysia that invested between 5% and 11% in the development of new products every year, which translates to between RM300mil and RM1bil. He said that over 10 years Proton would invest about RM6bil to RM7bil on capital expenditure. 

    “We would have small cars to high-end cars (by 2005). When you have a platform, you can make many models. It is a question of time,'' he said, adding that the small car market was the fastest growing and that was an area Proton would be moving into fairly quickly. 

    Mahaleel does not believe any value will be created if Proton were to form an alliance with a foreign player although that is the market trend, in view of Afta. 

    With an engine in place and new models on the cards, Proton does not want to remain a jaguh kampung (local leader); it wants to extend its global reach and is eager to tap the vast China market. 

    It has won a licence to sell commercial vehicles in China, where it would market its Arena model. Proton is also bidding for a licence to sell passenger cars in China and a decision is expected by June. 

    Mahaleel said plans were in place to set up a (assembly) plant in Guangzhou to produce 30,000 to 50,000 motor vehicles initially but the ultimate aim was to manufacture 100,000 cars for that market. “By then we will have both commercial vehicles and cars and that would be substantial volume,'' he said. 

    In Iran, he said, Proton had a plant and expects to produce 10,000 cars (by year's end).'' 

    There are also plans for Proton to set up a manufacturing base in North Africa. He also wants to re-visit the South American market into places such as Brazil and Argentina.  

    On top of that Proton has been asked by some countries to share its experience in building a national car. 

    There have been talks with Syria, Pakistan and Indonesia. 

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