With the Geely-Proton deal now officially confirmed, DRB-Hicom has revealed why the national carmaker requires a foreign strategic partner (FSP), and the reason it decided to sell off Lotus completely.

For the first bit, DRB-Hicom cites Proton’s lack of technological competitiveness, which it says could hamper its ability to develop quality products. Through the partnership, Proton will have access to Geely’s technologies, allowing it to remedy this shortcoming.

Next, the total industry volume (TIV) is relatively small in Malaysia, relative to other countries. In 2016, the Malaysian Automotive Association (MAA) reported a TIV of 580,124 units, which is less than in 2015 (666,677 units).

This leads to point number three – Proton lacks scale – whereby the carmaker is unable to maximise usage of its production facilities. This results in wasted capacity in light of the heavy capital expenditure to set up such facilities.

Lastly, with this global alliance and the technology sharing associated with it, Proton says it will experience quicker growth than if it operated independently.

As for the Lotus side of things, DRB-Hicom states the sports car producer “requires huge capital expenditure to be highly successful,” in British pounds nonetheless. Therefore, the disposal of its 100% stake in Lotus will allow DRB-Hicom to reduce its losses, and focus on other investments using the proceeds of the sale.

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