Tan Chong secures rights to Renault

BY KATHY FONG

Tan Chong Motor Holdings Bhd, a long-time Nissan distributor, has been granted exclusive rights to distribute Renault vehicles in Malaysia. 

Tan Chong said in an announcement to the KLSE yesterday that its wholly-owned subsidiary TC Euro Cars Sdn Bhd (TCEC) had signed a master agreement with Renault s.a.s on May 15.  

Under the agreement, TCEC will immediately import and distribute completely built-up (CBU) Renault vehicles on an exclusive basis and provide after-sales services. 

TCEC will also enjoy the exclusive right to assemble and distribute completely knocked-down (CKD) vehicles. It will start assembling the Renault Kangoo model at the Tan Chong Motor Assemblies plant in Kuala Lumpur in June next year, with an initial volume of between 100 and 200 units per month. 

According to latest Malaysia Au-tomotive Association (MAA) figures, 43 units of Renault vehicles were sold from January to March this year. 

According to the Tan Chong statement, the initial tenure of the master agreement is for six years. Thereafter, the agreement may be extended for a further six years on terms to be negotiated and mutually agreed upon. 

The master agreement is, however, subject to TCEC securing the agreed number of import permits for the importation of CBU models, assembly licence, and execution of the relevant operating agreements.  

Tan Chong estimates a RM30mil to RM40mil investment up to the end of next year for product development, production and assembly facilities, and working capital.  

“The additional business franchise will enhance the group's future growth prospects,'' the company said. “The Renault franchise will also enable the group to broaden its product range and further strengthen its position as a distributor within the Renault-Nissan Alliance.'' 

Meanwhile, in a separate statement jointly issued by Renault and Tan Chong, the two partners said that the project would contribute to the expansion of the Renault business in the Asia-Pacific region. 

“Making Malaysia an industrial base for Renault, the progressive application of the Asean free trade area (Afta) will allow exports to other countries in the Asi-Pacific region,'' the joint statement said. 

The Tan Chong group, however, does not expect the new venture to contribute significantly to itsgroup revenue and profit in the immediate term. 

“It is expected to produce reasonable rates of return over the medium term,'' Tan Chong said. 

Analysts contacted by Starbiz agreed that there would be a “gestation period” before the Tan Chong group gets a significant profit contribution from the new franchise, given the fact that Renault is not among the popular brands in the country.  

However, they see the new agreement with Renault as a good indicator that Tan Chong Motor's distributorship of Nissan vehicles, which is held under another subsidiary Tan Chong & Sons Motor Co Sdn Bhd, is rather secure now.