Proton-Geely FSP Archive

  • Proton-Geely cooperation targets production volume of 280,000 units – exports to China and Southeast Asia

    The government is targeting the Proton-Geely partnership to have a production volume of about 280,000 units, with a large chunk of this set for the China and Southeast Asian markets, Bernama reports.

    Second minister of international trade and industry Datuk Seri Ong Ka Chuan said the figure represented just one percent of China’s total industry volume (TIV) of 28 million units, and that Proton’s Chinese partner was looking to assist the national automaker secure the targeted number.

    He added that exports were needed because the automotive market in Malaysia – which recorded a TIV of 580,000 units last year – was small. “So, Geely with Proton needs to build a plant here in the next five years. When ready, cars will enter the China and Southeast Asian markets, with the latter being an important destination, with a population of 600 million,” he said.

    “Geely can provide the support from the aspect of outstanding research as we (Malaysia) need a big change. At present, all the automotive companies are racing to produce fully self-driven cars,” he added.

    Ong also said that Tanjung Malim will also witness a major change, with new jobs expected to be created in the near future, resulting from the economic spillover in the district.

    “We are taking the opportunity to plan for the construction of an electronics plant in Tanjung Malim as cars use a lot of electronics. What is important is that it will open up more job opportunities for the youth so that they need not migrate to the big cities,’ he explained.

  • Proton’s plan under Geely – return to profit “as soon as possible,” focus on Malaysia, ASEAN markets first

    It’s still early days in Proton’s partnership with Geely, but the latter already has a few rough ideas of what it has in store for the Malaysian carmaker. The most pressing part of the agenda would be to plot a sustainable future for Proton, on which the Chinese conglomerate will collaborate with co-owner DRB-Hicom.

    Speaking with reporters after the signing of the definitive agreement today, Geely chairman Li Shufu said, “We want to turn Proton and Lotus into profitable companies, and for their development to be sustainable moving forward. For Proton, we hope that we can help it regain market share in Malaysia, and also expand into ASEAN markets. For Lotus, we want to help it penetrate the global market.”

    Li Shufu was not able to provide a timeline for Proton’s return to profitability when asked, but said that Geely would want the company to be back in the black as soon as possible. “I cannot give you a definitive timeline now, but rest assured we have a good, solid plan that we will put in place soon, and we will announce it in more detail in due course.

    “We believe it will not take a long time because we have strong confidence in the growth of the Malaysian automotive market, and also in Proton,” he said.

    DRB-Hicom managing director Datuk Seri Syed Faisal Albar also weighed in on the capital expenditure that will be channeled into Proton, which he said would be dependent on the company’s business plan and its long-term product planning strategy. “One of the first things that we [Geely and DRB-Hicom] need to do together is to put our minds together to develop a business plan. From there we will know more.

    “Whatever spending [we will make] will depend on what Proton will be, in terms of its long-term product planning [such as which market segments the company will enter]. Only when a deep discussion on that has taken place can we come up with an amount,” he said.

    Geely executive vice president and CFO Daniel Li Donghui laid bare the amount of cash the company has injected into its subsidiaries. “After Geely bought Volvo, we provided more than €3 billion (RM14.4 billion); we also provided [the London Taxi Company] with more than £300 million (RM1.6 billion) to develop pure electric London Taxis and build a brand new, modern plant.”

    In the near term, Proton will initially focus on Malaysian and South East Asian markets – it has been reported earlier that Geely will not enter these markets, so Proton will have the space to establish a foothold there. Other export markets will only be considered once the company has managed to do that.

    “First, Proton needs to stop losing money and turn itself around,” said Li Shufu. “The priority now is to strengthen its presence in Malaysia and ASEAN markets first – that is where its core business is. Once it has become profitable and has a sustainable development plan and products, then of course it can have plans to export to other countries. There is no limit to it.”

    Lastly, Li Shufu said that Proton’s more than 30 years of experience in research and development will be beneficial in helping Geely develop right-hand drive cars. “Proton will become one of Geely’s global R&D centres, and will focus on right-hand drive research and development and market adaptation,” he said.

  • No plans to introduce Geely brand in ASEAN – Proton will focus on the region as a right-hand drive hub

    With the formalisation of the partnership between Proton and Geely today, questions were raised on the roles that Proton and Geely brands will play, both in Malaysia and the region. Geely chairman Li Shufu made things very clear at the press conference after today’s definitive agreement signing between his company and DRB-Hicom.

    Li explained that the future Proton-Geely brand relationship is akin to that of Skoda and Volkswagen, with the Czech subsidiary (like Proton) playing in the same mass market field as its parent group’s namesake brand (VW being Geely in our case). Both can co-exist and share plenty of synergies.

    Geely’s entry into Proton will not see the latter’s brand disappear – in fact, there’s potential for the Proton brand to grow. Li said that the group, which also owns Volvo and the London Taxi Company, has no plans to use the Geely brand in Malaysia and South-East Asia. The group plans to develop Proton as its ASEAN brand. “No brand conflict,” Li said.

    The Proton brand having its “own territory” goes well with the earlier stated Geely plan of making Proton and Malaysia its right-hand drive hub – of course, the three biggest auto markets in ASEAN (Indonesia, Thailand and Malaysia) are all RHD countries.

    However, let’s not confuse brand for product. What the Geely chairman is discussing here is the usage of the right brand for the right markets. There’s a possibility of right-hand drive Geelys sold as Protons in ASEAN and other RHD markets such as Australia, where Proton has already penetrated. Or Proton could have its own unique models based on Geelys – think Skoda Fabia and Volkswagen Polo.

    Of course, it’s still early days in this marriage and the new partners declined to provide any timeline or future model plans, beyond the confirmation of the Boyue SUV as the first Proton-Geely model for Malaysia.

    GALLERY: Geely Boyue in Malaysia

  • Proton-Geely FSP deal in detail – what DRB-Hicom, Geely and the Malaysian government will be getting

    Now that the definitive agreement for the Proton-Geely partnership has been signed, DRB-Hicom has revealed more details about Proton’s turnaround plan. On hand to feed the information to the media was Datuk Sri Syed Faisal Albar, group managing director of DRB-Hicom.

    During his presentation, Faisal explained the roles played by the government, Zhejiang Geely (ZGH), DRB-Hicom and other parties in relation to Proton, and we start with the carmaker’s new partner – Geely.

    Firstly, Geely will provide Proton with a consideration (funding) amounting to RM460.3 million, with RM170.3 being a cash injection, and the remainder being the cost of supplying the Boyue SUV platform. According to Proton, the valuation of the Boyue platform was undertaken independently by KPMG.

    The total consideration is what Geely is fronting to acquire its 49.9% stake in Proton, which has an implied post-money valuation of RM922.4 million. It was also revealed that the implied pre-money valuation of Proton amounted to RM462.1 million – the value of DRB-Hicom’s remaining 50.1% stake.

    Research and development will be an important aspect of the partnership, with Geely assisting Proton in terms of acquiring the latest technologies. Additionally, Proton’s R&D division will be transformed into one of Geely’s global centre of excellence, allowing it to develop future models.

    There’s also the matter of Proton relocating its operations to Tanjung Malim, which will allow it to be a manufacturing hub for right-hand drive Geely models. As the Chinese company will be supplying platforms and technologies to Proton, it will also impart its management expertise relating to manufacturing to ensure compliance.

    As for the assembly of Volvo cars at Tanjung Malim, Faisal said this is a possibility if there is excess capacity that can be spared to do so. This will also provide local vendors with the opportunity to be part of a global shared purchasing system, encouraging business growth outside of Proton.

    With Geely’s side explained, what about the government then? For starters, the remainder of Proton’s RM1.5 billion soft loan in the form of a second redeemable convertible cumulative preference shares (RCCPS) issue (RM250 million) that will be released today following the signing.

    Moving on, we arrive at the grant requested by Proton totalling RM1.1 billion as reimbursement for its previous R&D efforts. The government has said the reimbursement will only be given if Proton finds a strategic partner with a definitive agreement, which now makes the company eligible.

    Faisal pointed out that such a request was first submitted as far back as 2010 (before DRB-Hicom’s acquisition), where Proton was seeking RM3.7 billion. On the mention of loans, Proton will also back its syndicated loan of RM533 million to Malaysian banks to ensure a clean balance sheet.

    On DRB-Hicom’s end, Proton will transfer all non-automotive assets worth RM1.2 billion to its parent company, and repay all shareholder advances totalling RM567 million. In exchange, DRB-Hicom will also undertake any warranty and unmet volume amounting to RM331 million to ensure a clean slate for the partnership.

    In addition, DRB-Hicom will also foot the bill on a new R&D test track, something that is missing in Tanjung Malim. As Proton will vacate from Shah Alam, which is where it currently has a test track of its own, a new one is a necessity in Tanjung Malim for the development of future models.

    Aside from its dealings with Proton, DRB-Hicom will have its own engagements with the government arising from this deal, by purchasing RM350 million worth of RCCPS back from the government on behalf of Proton. Faisal revealed that although this purchase isn’t due until 2023, the government requires DRB-Hicom to purchase the RCCPS as part of a deal, before Proton is allowed to undergo any reorganisation.

    The government will also forfeit its conversion rights in Proton to show its intent to no longer be involved in the carmaker. These rights will be held by DRB-Hicom, but to ensure the government’s default risk is minimised if Proton is unable to repay its RM1.5 billion soft loan, DRB-Hicom’s RM1.2 billion asset pledge acts as a form of collateral (the remainder should be the RM350 million worth of RCCPS that DRB-Hicom buys from the government).

  • Proton to act like Skoda, Geely as Volkswagen – no conflict of interest despite similar brand positioning

    During a press conference following the signing of the definitive agreement of the Proton-Geely partnership, a question was raised if there would be any conflict of interest between Proton and Geely, given the brand positioning of both parties.

    According to Zhejiang Geely chairman Li Shufu, this will not happen as both brands have different target markets. In the case of Proton, Li said the national carmaker is mainly relevant to Malaysia and South-East Asia, which Geely has no plans for its own plan. This negates any possibility of brand conflict.

    Therefore, Geely plans to develop Proton into an ASEAN brand, and it will not have any brand presence here. He cited an example – where Proton is akin to Skoda, and Geely is Volkswagen. There’s plenty of synergy between the two brands even though both have different market positioning.

    Li also noted that in the early stages, the first goal is for Proton to stop losing money and to turn its fortunes around. Only when the national carmaker has achieved a certain scale and strengthens its position in Malaysia, will there be the possibility for limitless future development and exports to other countries.

    Geely is looking to tap into Proton’s experience in its over 30 years of existence, to help it develop right-hand drive models that are suitable for export. This is in line with Geely’s ambition for Proton’s Tanjung Malim plant to become its RHD production hub.

    GALLERY: Geely Boyue in Malaysia

  • Proton-Geely partnership – definitive agreement inked

    The Proton-Geely strategic partnership has officially begun. Earlier this morning, DRB-Hicom and Zhejiang Geely (ZGH) signed the definitive agreement for the Chinese carmaker to acquire a 49.9% equity stake in Proton.

    The deal was formally inked in Kuala Lumpur by DRB-Hicom group MD Datuk Seri Syed Faisal Albar and ZGH president An Conghui, witnessed by prime minister Datuk Seri Najib Tun Razak and ZGH chairman Li Shufu. The signing today took place exactly 30 days after an initial agreement on the deal was made in Putrajaya.

    It was announced at the event that the aspects of the partnership will include Proton being the manufacturing hub for Geely’s right-hand drive (RHD) models. The national carmaker will also have access to ZGH’s products, platforms and technologies. There will also be the opportunity for cross-pollination of talent with the Chinese carmaker’s global engineering centres.

    All this will provide Proton with the ability to access markets beyond Malaysia, with South-East Asia and China being markets mentioned. According to Syed Faisal, local vendors who meet standards will be involved in Geely’s global network. He added that Proton will be able to assemble Volvo cars at its Tanjung Malim plant if there is excess capacity.

    Najib expressed his confidence that in ZGH, DRB-Hicom has found a partner that has the ability, expertise and ambition to take Proton to new levels of success and a secure future.

    “Geely is a company with the right credentials, committed leadership, and a proven track record. The new partnership between DRB-Hicom and Geely could well see Proton become one of the leading carmakers in South-East Asia and one of Malaysia’s great exports to the region,” he said in his speech at the event.

    “That would represent a win for Proton, for the owners, for the Malaysian economy, and for the hundreds of thousands of Malaysians who would benefit as a result,” he added.

    Li was also positive on the agreement, and expressed his hope that the cooperation will yield success. “We hope that through our cooperation with DRB-Hicom, Proton will be transformed into the No. 1 independent automobile brand in Malaysia and one of the top three in South-East Asia,” he said.

    The signing of the definitive agreement today also saw DRB-Hicom concluding its 100% sale of Lotus Advance Technology to ZGH and Etika Automotive, with ZGH acquiring a 51% majority stake in the British sports car maker. In May, DRB-Hicom had announced that it was selling its entire stake in Lotus, exiting the sports car business completely.

    Li said that for Lotus, ZGH will increase new product launches and capacity to fully release the brand’s appeal. He added that Proton and Lotus will create synergies for ZGH to position itself as a major player in the ASEAN market.

    The Geely Boyue – which will provide the basis for the partnership’s first model- was showcased at the signing ceremony today – details and images of the SUV here. Also on show at the event was the updated and enhanced Proton Exora MPV, featuring lightly revised aesthetics and equipment.

  • Geely Boyue SUV makes first Malaysian appearance

    This morning saw Proton and Geely sign a Definitive Agreement that will see the Chinese company take up a significant stake in the Malaysian carmaker, and its Lotus subsidiary. The signing ceremony in Kuala Lumpur also saw the companies display what will be the first fruit of the collaboration, or at least the original form of it.

    UPDATE: Full live gallery of the Geely Boyue added

    We are of course talking about the Geely Boyue, which has been previously confirmed as the first new Proton model in the Geely era. The Boyue, already in production and on sale in China, will be Proton’s first-ever SUV. As Perodua does not have an SUV in its current line-up, Proton’s Boyue will also be the only SUV with a local badge in the market.

    However, it is not yet clear what Proton’s right-hand drive version of the Boyue for the Malaysian market will be called, and if there will be local styling changes made to the SUV – the unit on display here is Chinese-market left-hand drive Geely Boyue.

    Measuring 4.5 metres long (a new Honda CR-V is 4,584 mm), the Boyue is a five-seater SUV designed by former Volvo designer Peter Horbury, who heads Geely’s design studios located in Gothenburg, Shanghai, Barcelona and Los Angeles.

    In China, it is offered with a range of engines which include a 2.4 litre naturally-aspirated four-cylinder (162 hp/210 Nm) and a 1.8 litre turbocharged unit (163 hp/250 Nm for the manual, 181 hp/285 Nm for the auto). Transmission options include a six-speed manual or automatic, depending on engine choice. The T-GDI engine powers the unit shown here.

    In its domestic market, the Geely SUV also offers an impressive list of equipment like an eight-inch display screen, Apple CarPlay/Android Auto compatibility, and safety kit includes lane departure warning and adaptive cruise control (ACC), which allows the Boyue to match its highway cruising speed with the car in front of it.

    Proton’s version will come with a permanent SIM card slot, WiFi and related services, plus voice recognition, it was announced at today’s event. Like what you see? We’ve rendered a “Proton Boyue” with the local brand’s styling cues, to give you an idea of what to expect.

    When quizzed on timelines, Proton and Geely said that while they want this model in Malaysia as soon as possible, discussions are still needed on things such as whether or not to kick-off with CBU units, as well as the levels of localisation.

    GALLERY: Geely Boyue in Malaysia

  • Proton-Geely deal is a commercial move, not “act of vengeance” as implied by Tun Mahathir, says MITI

    The international trade and industry minister says that the government’s decision for Proton to enter into a strategic partnership with Chinese automaker Zhejiang Geely is purely a commercial move and was not done as an ‘act of vengeance’, as implied by former prime minister Tun Dr Mahathir Mohamad in a post on his blog last week.

    Datuk Seri Mustapa Mohamed said the deal for DRB-Hicom to sell 49.9% of Proton’s stake to Geely was made in the best interest of the national carmaker, its vendors and employees. In a media statement issued over the weekend, he called on critics of the Proton-Geely partnership to stop their negative comments over the upcoming deal.

    “To the critics of the Proton-Geely partnership, I say enough is enough. Logic and common sense must prevail against emotions at any turn, if we are to succeed in this rapidly changing global landscape. The choice before us all is clear. We either let Proton restructure its business with the help of a foreign partner or we turn a blind eye to the problems that the company is facing,” he said in the statement.

    Mustapa said that it was very unfortunate that the government’s sincere intention and unwavering commitment of wanting Proton to succeed were labelled by Tun Mahathir as an act of vengeance. He said there was no point in maintaining ‘national pride’ if it meant letting the company continue bleeding cash and jeopardising the welfare of its workers.

    The following is the media statement issued by Datuk Seri Mustapa Mohamed, in full:

    1. Much has been said about the future of Proton as a result of its proposed partnership with Geely. This is rather premature as it is still too early to tell but the indicators are pointing towards a brighter future ahead given, the track record of Geely in reviving Volvo. However, what we do know is that without the RM1.5 billion soft loan by the Government in April 2016, Proton’s future would have been challenging – the welfare of its total direct and indirect 350 vendors and 60,000 employees would have been at stake.

    2. The allegation that the Government has not disbursed the funds promised to Proton is baseless. From the total soft loan of RM1.5 billion, the Government has disbursed RM1.25 billion to Proton that was largely used to settle the outstanding payments to its vendors. The balance of RM250 million will be disbursed in about a week. Separately, as announced by the Minister of Finance II, the Government will reimburse Proton the research grant worth RM1.1 billion when the final agreement with Geely is signed in July 2017.

    3. While this assistance is unprecedented in an open market economy, it was a responsible move by the Government in ensuring all viable options are explored to secure a better future for Proton. However, the Government cannot keep on helping out Proton every time it faces financial difficulties. For this reason, the RM1.5 billion soft loan was made conditional upon Proton securing a foreign strategic partner.

    4. Today, the Malaysian automotive market size is about 600,000 units annually and for any company to succeed, it has to meet the economies of scale. Proton has been coming to the Government with a number of export promotion plans in the last five years. Unfortunately, none of them has materialised.

    5. It must be reminded that the decision to partner Geely was purely a commercial decision made in the best interest of Proton, its vendors and employees. It was made after taking into account a number of factors including the benefits to be derived from Geely’s technology, R&D facilities and injection of cash.

    6. It is very unfortunate that the Government’s sincere intention and unwavering commitment of wanting Proton to succeed were labelled by Tun Mahathir as an act of vengeance. The Government will and always protect the best interest of the nation, and we do not make decisions based on personal vendettas and the need to settle scores.

    7. The new reality is that the automotive industry has become very global and inter-connected. Joint ventures have become a norm as not many carmakers can stand on their own feet, with examples such as Nissan-Renault and Cherry-Jaguar Land Rover. What is the point of maintaining ‘national pride’ as claimed by Tun Mahathir if it means letting the company to continue bleeding cash and jeopardising the welfare of its workers?

    8. Furthermore, to repeat the allegation that we are sacrificing national pride is pointless as evidenced by the Perodua-Daihatsu partnership and many other joint ventures. As we know, Malaysian companies and GLCs also have major stakes in a number of operations overseas. We live in a highly- globalised environment and in order to successfully compete globally, we must pool together our resources and forge ahead.

    9. To the critics of the Proton-Geely partnership, I say enough is enough. Proton will have a foreign strategic partner moving forward but Malaysia still retains majority control. Proton is known globally as a Malaysian brand and nothing can take that away from Proton.

    10. The choice before us all is clear. We either let Proton to restructure its business with the help of a foreign partner or we turn a blind eye to the problems that the company is facing. At the end of the day, it is the interest of Proton’s vendors, management and staff that must be prioritised above and beyond pride as well as nostalgia. Logic and common sense must prevail against emotions at any turn, if we are to succeed in this rapidly changing global landscape.

  • Geely deal will free Proton from gov’t subsidies – MP

    A member of parliament says that Proton’s strategic partnership with Zhejiang Geely will bring about many benefits and free the national automaker from perpetual government subsidies, Bernama reports.

    Datuk Ahmad Fauzi Zahari, the MP for Setiawangsa, said the subsidies given to Proton since its inception had run into billions over the past 30 years, at great expense to taxpayers, and could not go on forever.

    “I support the view of Second Finance Minister Datuk Seri Johari Ghani who hopes that moving forward, there will be no further subsidy for Proton and that it will be able to stand on its own feet without asking for government help. The government now cannot afford to continue to put good money into bad business. We have to cut bad business off,” he said.

    He said that the tie-up with Geely would bring about increased production and earnings for Proton.
    Though Proton’s current annual production at its Tanjung Malim plant is around 74,000 units, or only 20% of its capacity, Ahmad Fauzi said the partnership with Geely will change that.

    “To begin with, Proton will now be able to increase its production five-fold to 500,000 vehicles in the just three years to the year 2020 with its entry into ASEAN, with a population of 600 million, and more significantly, the huge China market, with annual car sales of 28 million,” he said.

    “Even if Proton, via Geely, secures just 1% of the China market, it means 280,000 extra cars for Proton to produce. The sky’s the limit for Proton. Just imagine the thousands of new jobs to be created for Malaysians,” he told the national news agency.

    Ahmad Fauzi said he was personally excited about Proton’ future because the deal means saving some 60,000 direct and indirect jobs as well as some 200,000 other vendors, distributors and suppliers.

    “Saving jobs had always been uppermost in the government’s mind when injecting funds into Proton all these years, and the sale of the Proton’s stake should be seen strictly as a business decision and nothing else,” he stated.

    He said that the industry had evolved, and consolidation was the name of the game. Citing the acquisition of British brand Land Rover (and Jaguar) by the Tata Group of India as an example, he said the British public never regarded such a business deal as a “sell-out,” and Malaysians should be matured enough to behave similarly.

  • DRB-Hicom will continue to manage and lead Proton

    Zhejiang Geely‘s acquisition of a 49.9% equity stake in Proton will not change the way the automaker is run, with the management of the national carmaker continuing to be led and overseen by its parent company, DRB-Hicom.

    According to The Sun, international trade and industry minister Datuk Seri Mustapa Mohamed was informed that the deal will have no significant impact on the executive aspect of Proton.

    “We understand that DRB-Hicom will continue to lead in the management of Proton. That’s the information I received. Of course, it’s a business decision. So whatever it is, we leave it to the company to decide what is best for them,” he told reporters.

    The deal, which will see Geely and DRB-Hicom signing the definitive agreement before the end of July 2017, will also see the Chinese company acquire a 51% majority stake of Lotus Cars from Proton. The latter had also announced that it was selling off Lotus Cars in its entirety, with the remaining 49% stake to be sold to Etika Automotive.


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Last Updated 22 Jul 2021