Lim Chee Ming writes in…
Some of the points that Kuli had brought up during the video interview may be less accurate or not updated but i agree with his general point of view, that we do not have the economies of scale to compete competitively in the world markets. We can have the lowest engineering cost in the world but we don’t have the economies of scale in the manufacturing because our domestic market is so small and our export non existence. Can u imagine that premium manufacturer such as BMW sold 1.2 million cars a year, at such high profit margin, while our Proton manufactures around 180,000 last year? Although BMW’s engineering cost may be 10 times that of Proton but if we look ath its production volume and the kind of margin it made on its car, what does that tell us? This is not to mention that Korean players such as Hyundai makes 4 million cars a year and GM even more. Tun M has even mentioned in a recent interview in Malaysian Business that Proton needs to make 500,000 units a year to have the scale of economies. How can Proton ever achieve that consider that its production is only a quarter of that? Does it mean protection for another 20 years for Proton and Malaysian buyers continue to be deprived of choices for reasonably good quality cars and affordable prices?
I know you’re a car enthusiast but perhaps you’re not mature enough to know abuot how the economics work.
I did not make any claims in this blog that I know how the economics of car manufacturing work. From where did you get that assumption?
My dear readers… any comments on what he has shared?
Looking to sell your car? Sell it with Carro.
yes paul you never claim that
i agree with him about the economic of scale but unlike BMW, proton is mostly government owned. Proton can survive for the next century on 5 cents per year profit if the government allowed it (petronas banyak duit ma!). BMW as a 100% business entity need to show growth in its profit year after year, if not its shares will be deemed unattractive and investors will dump it.
Probably the most effective way is improve their R&D and market research facilities. Some car makers can do well not only rely on the economies of scale.. WHAT IS ECONOMIES OF SCALE? Do we need to refer that then decide the number of prodction? We can always developed new types protocal cars, expand the market, export it and continous to do R&D and Market research to improve..
Its easy to simple bandy about terms like "economies of scale", but the truth of the matter is, Proton doesn't have a sound business plan. Rather than simply saying "we've made so much dosh in the last x months" (its to be reminded that its money from the people of Malaysia that hardly has any choice at this price range for NEW cars) and saying that a model of a car is "made in malaysia". They may seem like milestones, but its all just PR speak.
Proton needs to get its head out of the john and simply remember, refocus on its original mandate: to secure the future of Malaysia, and of Malaysian as an engineering resource. Nothing more. If Proton has done what it was made to do, that is to create a pool of talent capable of not only manufacuturing cars, but the design them as well as whatever else that may require engineering talent (remember that Tun M had once attempted to build an aerospace industry in this country).
For Proton to have "economies of scale" it needs to dig deep into its psyche and see it for what it is: an assembler (saga, wira, satria – All Mitsus) and not a builder (Lotus this, Lotus that does not mean that Malaysian talent is being developed..but I hope I am wrong).
As James May from Top Gear has said of the Gen 2, "It may have Lotus developed suspension, but what I wouldn't give for some Toyota developed door trim". If Proton would focus on what they need to be good at, by building good quality, decent, value for money autos, plenty of Malaysians would be more than happy to drive one (me included), rather than having a "sporty" ride that falls apart at the first unsightly pothole.
Look at how the Japanese or Koreans came up in this automotive world. They produce good, realible (Koreans are getting there..in fact they are rated very highly in the US) autos that bring people from A to B.
Its been noted that the Waja is a pretty good platform, then build on it. Make Waja cars, estates, sports cars, minis etc… that exploit this platform, then at least Proton has a fighting chance at achieving "economies of scale".
Its time that they get rid of the old Mitsu-derived models. After all, money still has to be paid to Mitsubishi for its use, why not use our own? Then Malaysian talent can be utilies to evolutionize what we already have, rather than hoping on the next "revolution." (daring to dream? that's what it is, just a dream).
Economies of scale are easy enough to understand. Place an order for 100,000 widgets from a machine shop and he might charge you a dollar for each. Place an order for 1 million widgets and he's definitely going to drop the price for each widget, to say 60 cents a piece.
A higher level of production makes it worthwhile to invest in greater capital assets, machineries and processes which have a lower running cost per unit than using labour intensive processes. Or to put in another way, at 100,000 widget production its not worthwhile to equip each worker with automated tools that increase their efficiency. But the income from 1 million widgets makes it worthwhile to equip the workers with better training, processes and equipment to increase their productivity. With increased productivity and efficiency the cost of making a single widget decreases dramtically.
Also when you order any material in bulk you'll command lower per unit prices. Normal business snese. Sell more to one customer and you'll give him more discount. Hence per unit (or in this case per car) the costs will be lower.
But all this is only worthwhile if production scales up. In the case of Proton, they are way too small to justify that level of automation and capital investment. Their purchasing power in the materials market is too weak.
Thats why the big car manufacturers are consolidating and forming big giant corporations like GM, Ford, Daimler Chrysler, Toyota-Daihatsu etc etc. Because when you buy collectively, you get more control over the price of your materials. Also you can spread R&D costs such as platforms, transmissions, modular engines. Why do you think SEAT, Volkswagen, Audi and Skoda consolidate? They share R&D into chassis, drivetrains etc. Only the body design looks different. Door handles and common parts like switchgear, suspension, brakes etc are basically the same on all those cars. Thats cost savings.
If all of them in the VAG group buys tyres from Continental, then Continental are going to charge the VAG group less per tyre. More savings.
Thats what is meant by economies of scale. Proton's purchasing power and size are simply way too small to obtain substantial savings in cost per car. I repeat, per car. Thats why Protons cost per car is astronomical. And thats why we're paying so much more for them than need be. Thats why the equivalent Toyota costs way less.
And thats why we've been screwed for 20 years.
Proton needs to expand production. To market that extra production means exports. But the quality of the cars are so shit no one wants them. Its catch 22. To improve quality and profitability they need to expand. But to expand they need to improve quality and profitability.
The government should never have gotten us in this mess in the first place.
The head of Proton have tried but the Kakitangan is with "tidak-apa" atitude. The Kakitangan at Proton should treat all the Proton car owners with respect, but now is not. They are thinking that people who buy Proton is because it is cheaper. And when the we complain about the car, the response is "what do you expect from this price". THIS IS VERY VERY BAD!!
They (Sales and Service Centre) have to start to think that Malaysian buy Proton because of our loyalty and supportive to the National Car Project. We are giving them a chance. So they better know how to respect the Proton car owner. And off course Proton have to do much better in their product. HENCE PROTON MOTTO SHOULD BE "CHEAPER YET BETTER".
WITH THIS, MAYBE PROTON HAVE CHANCE TO SURVIVE.
REGARDS,
MALAYSIAN Chinese
that's why i wrote in some other post, (i think the one about the 1.3 gen2)…once the 1.3 gen2 is launched, dump the iswara and wira…if u have confidence on ur new products, why bother making the old ones? that will only cannibalise sales of the new models. slash the price of the savvy, to start at RM35K, proton would have a winner. the hardest part with reforming proton is actually the parts vendor programme. it's too politisiced. fyi, most of proton's quality defects start here. going with tuv is a good start, and we r not too far off really from hyundai or kia.
'Economies of scale' – So if they cant really produce that much, anyone here gives a fork???
To quote what Lim Chee Ming wrote 'Does it mean protection for another 20 years for Proton and Malaysian buyers continue to be deprived of choices for reasonably good quality cars and affordable prices?'
Notice the word DEPRIVED??? It is Proton's lacking, and it is us who are being deprived… what the fork is this??? fork off with your burden… I'm not as patriotic as having a national milo tin and yet being deprived… i'm starting to accept myvi as national car due to its outstanding development, but not this piece of shit!!!
I don't think MYVI is a national car anymore cos perodua is 51% owned by Daihatsu. Perodua says they spend about RM 250 million against RM 6,000 million ringgit to develop a car in Japan… that is only 4.16 %. Maybe only enough to design the bonet???? If the car is design in Malaysia than it would be 50% of the total cost against RM 500 million.
Its easy to just say we do not have "economies of scale" so our gov't must continue to protect Proton. That is just an lousy excuse for Tun to say.
Yes the malaysian market is small, but so is the Korean market. But why is the korean car selling like hot cakes worldwide? If the proton were to make "BETTER" cars then they can tap into the world market and "economies of scale" isn't a problem at all.
Proton have a chance to improve and compete after all these years of protection, but instead it choose to rip-off its customer i.e. the very own Malaysian who supported proton. Our Tun claim that because proton do not have economies of scale that is why protons cost is higher. Do you really believe that? I for one don't believe it at all and let me tell you why. How the hell do you think that proton can have such a huge pile of cash reserves and can purchase Lotus??? Its because proton is making huge profits at our expense!!! Ever walk into an imported car showroom and check out the prices of imported cars minus the imported tax? You will be shock to find out that why is these imported cars so much better and nicer and yet the actual imported price(without tax) is about the same,or even cheaper than our locally made proton even after shipping it here. Proton can made better cars by putting better quality components into it but they didn't want to. This is because with gov't protection by slapping high taxes on imported cars, proton cars will sell regardless of quality! So proton chooses to rip-off the patriotic malaysian who have no choice but to buy proton.
So do you think its lack of economies of scale that the gov't should con't to protect proton? Think Again….
first of all if any1 sez that our domestic market is too small to reach the economies of scale of car production, that might be true, but why not look at swedish car maker volvo. if i not mistaken sweden only have a population of 5 million people. so how it reach its economies of scale? through export laa brader!!!!!!! takkan tu pun tak tau!!!!!!!!!!!!!
A lot of people thinking that all the taxes collected from the consumer are for protecting Proton. Did anyone stop and think that those taxes also funds many projects in the country.
Proton does have to take some blame. But things aren't entirely their fault. Read the article, then you will understand more of the situation.
brader arrun…they know export laa…but matter is who want to buy???? if ur kuality is not up to ppl's expectation…who wants to buy?? ppl who to buy our car such as vietnam and cambodia…they dun have $ to buy. ppl who have $, they would prefer other bland as the price of our plotong similiar to other model (i.e. savvy selling at 7000 pounds, same price to a citroen C3 or peugeot 206…) how? u 'tiao' me how larr???
If you want to compare, at least do some research first before you just come up with numbers. C3 costs 9000 pounds and that's the starting price which means and empty car. A fully loaded ones goes up to 12K. Same thing goes to the Peugeot 206.
dear brade abu, if u don't notice a few comments from past in this blogsite did mention about how wonderful proton cars is in uk. however this only can be a dream to malaysian to have this kind of proton.(THIS MESSAGE FOR PROTON) Haiiya plotong, why can make good car outside only not inside u cannot have this kind of mentality quality car must be built no matter the market maa!!
we always know one thing to PROTON…
the sooner the PROTON change their attitude and start building a reliable, cheaper car, the earlier the success waiting for PROTON…
but what we have seens till now? lots of excuse here and there… can't just change their mind on this? the BASIC still cannot fulfill, y thinks others??
bloody hell…
Hey guys, since proton is just come out from it shell (Mitsu platform) and now having their own IP (intelectual property), let's give them another few years and I believe in 5-10 years with all our support, proton would have the world wide (among the best) quality standards, design and performance that people looking for in a car. Just only hope that Proton direction is to improve in every way (TUV for quality, lotus for performance and M'sia creativity for design). I'm waiting for another 5 years and if Proton still sucks, I'll boycot Proton for ever…….ALFA u r my #1
talking about economic….
1. buying a good car is not economic to the Malaysia people.where buying a average low cost car such a vois might bond you for 5-7-8 years.
2. if proton make it success…the money still go to proton investor only.Capitalism…unless we become the Soviet union or the Republic…
3. people get kill using proton.
4. I have it enough of the political lame excuse by Mr M…protect proton..?since when Malaysian economic depend on proton.thts is so stupid.we will live on with or without proton.
5.proton basically killed the Malaysian automobil bussiness..AP, high tax etc etc
6.a successful company dont need protection. I feel that is too Malay way to do bussiness. Do you see Malay making names in Forbes/money with political influent…?admit it Dr M. you only make you own race weaker n spoon feeding.
7. finally, since i am so sick of the proton + Mr M + political+ gov Protection Crap..i decided my 1st and last(forever) car will not be a proton.SAY TAK NAK TO PROTON~!
8. I hope Mr M will say sorry to all Malaysian…because of you the Car tAx is so expensive.my money is for me not for proton~!
i can't agree more to MALAysian:SayNoToProton's comment. Say Tak Nak To Proton….. wow, what a good tagline. High marque cars in Msia come with a mind bogling pprice tag. Unless, you are a Tan Sri or Datuks or your dad are one, an average Joe in the street like me will probably own a Proton anyway. Why? Because the gov forced us to do so. My fist car being a Wira will also be my last one. 2years down the road, the car is……. again said…. mind bogling. A decent 20k pund will get a top of the margue VW in UK. In Msia, you get a shit Proton for near 50k. (No justification of conversion rate here as the average income in UK is 2k pound which is also RM2k here) Anyway, I'm working very hard to dicth my Wira and get myself a good Japanese or Korean car. No matter how Proton turned out to be in the future……. i gave up on you already…..
Tak Nak to Proton!!!
well, good for u babadaniel!
but still as you write 'proton' make u to work hard
if only 'proton' can change everybody life to the better
good or bad, you all attached yourself to 'proton'
what a life you have, me too!
viva proton!
We should all boycott Proton, migrate to Europe and enjoy driving nice cars without breaking a bank. A bit far-fetched but that's what I can think of…hahaha… =)