Proton Seeks Government Funding to Back New-Model Development

Malaysian automaker Proton will release a totally new model by year’s end and wants the government to pay for the vehicle’s R&D costs, Proton Chairman Mahathir Mohamad says.

The government’s Bernama news agency quotes him as saying the price of the new model will be lower than any other vehicle in the same segment.

"However, it has to go up a little (from where current Proton models reside) as customers are paying for something better,” he says.

Mahathir provides no details of the new car.

Proton funded the model’s development and has been using its own money for R&D for some time, he says, and the government should reimburse it.

“In South Korea and Japan the governments support the private sector, and as a result they gained from the taxes collected,” Mahathir says,

The Star newspaper quotes the former prime minister as saying Proton has asked the government to reimburse some of the money it has spent on R&D projects.

“This is a normal practice in the car industry, where incentives are given to car makers for development of new technology,” Mahathir says.

Proton was taken private by DRB-Hicom in 2012 after it acquired a controlling stake in the automaker from government investment agency Khazanah Nasional.

Khazanah decided to divest its interest after its attempts to restructure the company following the entry of foreign automakers failed to get the approval from the government.

Proton is struggling in the more-liberated Malaysian new-vehicle market.

In the first five months of the year its sales fell 2% to 52,920 units and its market share slumped to 19% from 21% year-ago.

Proton CEO Abdul Harith Abdullah confirms the now privately owned company will apply for a government grant as part of its initiative to boost its R&D effort in a move to produce quality vehicles.

He tells The Sun Daily newspaper the national automaker spends between RM200 million ($62.8 million) and RM300 million ($94.2 million) on R&D for one model.

“The government made it clear that they are supporting all R&D programs for every industry,” he says. “If there is an incentive program offered by the government, we will apply for the incentive. We have been building cars over the last 30 years. We have never received any annual incentives.”

Abdul Harith says Proton’s plan is to come up with a new model every year.

“We are introducing one this year,” he says. “Hopefully, we continue to introduce at least one every year to make sure we have continued survival and continued followers.”

He declines to elaborate, but the newspaper reports the Public Investment Bank said in a note to investors Proton will be launching a new model under its Global Small Car (GSC) program by as early as third-quarter 2014.

“We believe the GSC will be Proton’s key product to provide the sales volume necessary for Proton to break even,’’ the bank says.

The New Straits Times newspaper reports Proton aims to improve the quality of its cars by working closely with vendors supplying parts.

“The vendors play an important role in the quality of our cars because when something goes wrong with a supplied part, it’s usually Proton that gets the blame,” Mahathir tells the newspaper.

“I believe they have the capability to make good components, but sometimes we end up with poorly made components.”

Vendors not meeting the criteria will be dropped, he says.

Earlier, Proton debuted new executive variants of its best-selling Saga and Persona cars.

The Saga Executive and Persona Executive are aimed to appeal to younger buyers, be it singles or those with a young family.

Enhancements to the Persona Executive include a new body kit, leather seats, 15-in. rims, steering with audio switches, 4G Wi-Fi with 1-year free limited usage, front fog lamps, rear spoiler, body-color door handles, chrome front and rear decorative wings, and driver-seat height adjuster.

The Saga Executive gets new special-edition monotone body kits, satin black center panel console, satin black air-conditioning vent, satin black inner door handle, metallic warm gray front fog lamp garnish, smoky-colored rear combi light and leather seats.

“The enhanced version of both our best-selling cars will provide our customers value-for-money options without compromising on comfort, safety, performance and quality,” Abdul Harith says.

Rival Perodua remains the market leader in Malaysia with first-half sales of 94,500 units for a 28.4% market share, down from a year-ago 30.9%, the cbt.com website reports.

The Malaysian Automotive Assn. has yet to release official first-half figures. The website says Perodua estimates first-half industry volume rose 6.2% to 332,800 units.

Perodua President and CEO Aminar Rashid Salleh says the erosion of the company’s market share can be attributed to intense competition from other players in the industry, as well as the tightening of vehicle financing guidelines, according to cbt.com.

Perodua has lowered its full-year sales forecast to 193,000 units from 197,000.

Aminar tells the website a fourth model will join the company’s lineup this year, but does not give any details.