Malaysian Leader Who Launched Proton Wants Reprise

The man who created Proton, the Malaysian national automaker, in 1983 wants to do it again.

Newly elected Prime Minister Mahathir Mohamad says he’s mulling a third national car company, following Proton Holdings’ 49.9% takeover by China’s Zhejiang Geely.

Money-losing Proton was taken private in 2012 by the DRB-Hicom conglomerate and last year decided to link up with Geely. The move was supported by the previous government but was strongly criticized by Mahathir, who had retired as prime minister in 2003.

But a shock opposition election victory May 9 saw Mahathir, 92, returned to power by defeating the party he once led.

If a new national car company is set up, it would be the country’s third after Proton and Perodua.

“Our ambition is to start a national car with partners in the region,” Mahathir says at the Nikkei Conference on the Future of Asia in Tokyo.

He says the partners could be from countries such as Thailand, South Korea or Japan.

“Such a project will be a catalyst for growing Malaysia's engineering capability similar to what the government had done when it established Proton,” Mahathir is quoted as saying by the Bernama government news agency. “We need to create opportunities for engineers to do their own things here.”

Mahathir believes Malaysian engineering companies could benefit from the current globalization trend where major manufacturers outsource parts and components from other countries.

“We can produce parts for branded cars in Malaysia and for export,” he says. “That would earn us a lot of foreign exchange.”

But Malaysian economists are saying the new government needs to think long and hard before jumping back into car production and consider factors such as the feasibility of adding capacity in the car-assembly market, retail car prices, export strategy and new-car technology.

Center for Public Policy Studies Chairman Ramon Navaratnam tells The Edge Financial Daily newspaper Malaysia should learn from its past mistakes with Proton before proceeding with new investments.

Jalilah Baba, chairman of consultancy company Crewstone International, says Malaysia and its population of 32.4 million is not a big market. “The government needs to assess the type of auto investors that they want to bring here,” she says.

Jalilah says local automakers are facing excess capacity, and she questions whether there is a market to absorb more cars. On the plus side, she says, are the potential for job creation, the transfer of technology and healthy competition that will lower car prices as a result.