Honda, Owner of Malaysia’s Proton Forge New Link

Malaysian auto maker Proton unexpectedly signs a collaboration agreement with Honda.

Proton parent DRB-Hicom says in a statement to the Malaysian Stock Exchange the alliance will explore opportunities in the areas of technology enhancement, new products and platform and facilities sharing.

The partnership does not involve an equity stake.

“This agreement signifies the potential of a long-term strategic collaboration with Honda,” DRB-Hicom says.

“Having a strong and renowned global automotive player like Honda Motor as the foreign strategic partner to Proton will provide Proton and the DRB-Hicom Group with the opportunity to grow as an original equipment manufacturer, as the opportunities are endless.”

The Star newspaper calls the choice of Honda a surprise, saying there aren’t many tie-ups involving the Japanese auto maker, and it normally would explore and expand markets on its own.

Analysts believe the non-exclusive agreement will be a prelude to more strategic Proton collaborations should the need and opportunity arise.

RHB Research analyst Alexander Chia tells the newspaper the agreement does not appear to prevent Proton from entering into alliances with other global auto makers.

“Any global OEMs, for that matter, would be capable of bringing Proton to a better place,” Chia says. “Honda has a comprehensive product range, particularly in the medium- to small-car market, including hybrid technology, which is a wide area the parties involved can delve into.”

He says the timing of the agreement also is sooner than expected, considering DRB-Hicom still is absorbing Proton. DRB-Hicom bought government investment company Khazanah Nasional’s 42.7% stake in the auto maker in January for 1.2 billion ringgit ($385.5 million) and later acquired the remaining shares for MYR3.02 billion ($988.3 million).

DRB-Hicom has raised Proton’s domestic-sales target to 200,000 units for its fiscal year ending March 31, 2013, from 167,000. But The Star quotes a research note from Hong Leong Investment Bank that deliveries from April to August totaled only 61,400 units.

DRB-Hicom Chief Operating Officer Khalib Mohamad Noh says there is a need for the conglomerate to field a competitively priced car in Malaysia.

Chia expects the Honda-Proton collaboration soon will address technology enhancements such as joint development of a new engine, because the Campro engine made by Proton is reaching the end of its shelf life.

CIMB Research analyst Lucius Chong sees Proton squaring off against Perodua, which has a relationship with another Japanese automotive giant, Toyota, via its Daihatsu subsidiary.

The Business Times newspaper says the new agreement continues a strong relationship between Honda and DRB-Hicom going back more than a quarter-century.

They teamed up in 1985 to set up Hicom-Honda Mfg. to produce Honda motorcycle engines and components. In 2000, they set up Honda Malaysia, which led to the opening of a car plant in Pegoh, Malacca, that now mainly assembles Accord, Civic and City models.

Honda Malaysia, in which DRB-Hicom owns a 34% stake, recently bought 50 acres (20 ha) next to the Malacca plant and will expand the operation to build 100,000 units a year.