Mitsubishi Takes New Production Partner in Malaysia

Mitsubishi signs a deal with Tan Chong Motor Holdings to assemble cars in Malaysia after ending its 5-year-old collaborative agreement with national auto maker Proton.

Neither company announced the change made in April, but it is revealed by Hong Leong Investment Bank Research analyst Daniel Wong in an investment report.

The new agreement is between Mitsubishi’s 52%-owned Mitsubishi Motors Malaysia unit and Tan Chong’s 70%-owned Tan Chong Motor Assemblies.

“We believe that the contract is relatively small at the moment and may involve only passenger cars, an annual volume of 4,000 to 5,000 units (complementing Thailand’s global manufacturing hub for pickup trucks),” Wong says in his report.

The Star newspaper reports Mitsubishi Malaysia Vice President Hoffen Teh confirms the change, saying both parties have “more or less reached consent” of the contractual agreement’s details.

He declines to reveal the models to be assembled but says they will be limited to the domestic market, adding, “The startup in production would not be so soon.”

Mitsubishi Malaysia has a range of pickup trucks and sedans in its product lineup, including the Mitsubishi Lancer, rebadged as the Proton Inspira.

Mitsubishi terminated its agreement with Proton after the auto maker was bought by DRB-Hicom, which opted for Honda as a foreign strategic partner for Proton.

The Star reports the agreement signed in December 2008 was for a product collaboration under which Proton would source a vehicle from Japan to replace the Waja and Mitsubishi would take the Persona and Proton’s multipurpose vehicle to be badged as Mitsubishi models.

The newspaper says both these plans have been canceled and there may be more fallout from the changing alliances.

It says 48% of Mitsubishi Malaysia is owned by EON, a unit of DRB-Hicom. EON is the biggest distributor of Proton cars after DRB-Hicom merged the operations of EON and Proton Edar.

“Industry sources believe DRB-Hicom may see some conflict of interest with its multi-layered collaboration with numerous parties, adding fuel to speculation that EON’s stake in MMM could be up for sale,” the newspaper says.

Tan Chong owns two underutilized assembly plants with combined annual capacity of 100,000 units a year and is seeking to increase their output.

It is the franchise holder and exclusive distributor of Nissan passenger and light-commercial vehicles as well as Renault vehicles in Malaysia, with 98 sales branches and authorized dealership outlets nationwide.

Tan Chong also is the franchise holder and exclusive distributor for trucks and buses under the UD Trucks and Silverbus brands, with 12 sales centers and 16 dealers.

It recently won exclusive rights to distribute Nissan vehicles for five years in Myanmar. Analyst Wong says Tan Chong also has signed an agreement to build 7,000 Subaru models from complete-knocked-down kits a year.