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Why not merge Proton and Perodua?


THE premise for the national car project was quite simple: an affordable car for the public manufactured by a Malaysian company. When Perodua came into the picture, both companies had their roles clearly defined: Perodua would manufacture cars below 1,000cc and Proton would stick to cars 1,000cc and above.

The first flaw in the National Automotive Policy was to allow Perodua to build a car above 1,000c. The arrival of the MyVi saw an immediate battle between the two national car companies when Proton came out with its own small car in this segment, the Savvy. At the end of the day, both companies are cannibalising each other’s market share, with the odds heavily stacked against Proton in this segment.

Now we have Geely which managed to obtain a 49.9% stake in Proton amounting to RM460.3mil, with a cash injection of only RM170.3mil and the remainder being the cost of supplying the Boyue SUV platform. Proton was independently valued at RM922.4mil by virtue of this exercise.

Concurrently, we have another situation with Perodua, whereby UMW Holding Bhd’s wholly-owned subsidiary, UMW Corporation Sdn Bhd, which currently owns 38% equity interest in Perodua, is embarking on increasing its equity which will ultimately see the UMW Group owning 70.6%.

Incidentally, UMW Holdings Bhd is majority owned by the biggest funds in Malaysia, such as Amanah Saham Bumiputera, PNB and EPF, thus making it a truly Malaysian entity.

Perhaps it might be quite apt to consider merging Perodua and Proton, thereby ensuring Proton still retains its status as a Malaysian brand. The merged entity can then decide on how to cut the pie, with Perodua continuing its forte in the below 1,300cc segment and Proton aiming for the higher value segment.

Geely’s current intent seems to be to launch the completely built-up version of the Boyue meant to be Proton’s first SUV. In this respect, one has to take this strategy with a pinch of salt, as we don’t yet know whether Geely sees Malaysia as a platform to introduce its brand to the rest of Asean.

Ultimately, a merged entity will be able to control 50% of the total passenger vehicle market in Malaysia. Perhaps this entity can have a larger public float that will allow Malaysians to invest, albeit through a special purpose vehicle in the form of a trust fund. A certain percentage of the equity can be set aside for foreign car companies willing to invest and transfer technology.

Incentives can also be given to Malaysians who support Malaysian car brands, from discounts on car duties to lower road taxes, subsidised tolls and petrol cards.

B.J. Fernandez

Shah Alam

   

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