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The local automotive scene has been abuzz with Proton late and it’s not all good news. It all started with Proton’s chairman Tan Sri Mohd Khamil Jamil expressing his disappointment to the Business Times, saying Malaysians are not supporting Proton, a product made from our national pride. Comparing against the Japanese and Korean markets which has strong support from their domestic market, Mr Chairman does not understand why Malaysians would rather pick other models despite Proton achieving improvements in their products and technology (a statement was later issued by Tan Sri Khamil that the remark was taken out of context and he did not mean what is being implicated). When people are more willing to fork out more for a Toyota Vios that has as much features as a can opener instead of buying a full spec Proton Preve, you can’t say he doesn’t have a point.
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But is it that simple? Here’s what kensomuse thinks about the whole fiasco …
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Perception
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When Proton Saga was born, I was still schooling and the only wheels I knew of were those of my tiny bicycle. Malaysia was a very different place then and for the general populace, there was a great deal of pride associated with Proton. But pride alone doesn’t sell because even back then, the reliability the Japanese automakers were established and Proton’s first task was to position itself as a serious automaker that produces a car on par with others, if not better.
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And if you’re wondering where the “door slam” test came from, check out one of the first Saga advertisement:-
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Those old enough to remember the Saga’s launch would also recall the accompanying doubt of whether or not it can pass the most gruelling performance benchmark test at that time; Can go up Genting Highlands with a full load? And not overheating? Proton did better; it organized a convoy to Cameron Highlands which made the roads up Genting look like a freshly tarred highway.
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To protect the fledgeling company, the government started levying higher taxes and duties of non-national cars. Without this affirmative action, Proton stood at a huge disadvantage when competing against other automotive market leaders of the 80s such as Toyota and Nissan who had far better economies of scale and greater experience in running an automotive company. Such a change in automotive policy is not unique to Malaysia; countries with domestic automotive brands such as South Korea and Japan has done the same thing.
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But compared to the other countries, Malaysia’s automotive sector has not taken off as spectacularly as what we were lead to believe. Instead of becoming a big fish in the global pool, Proton has been seeing its market share eroding over the years, despite launching newer, modern models. The reasons for the lost of consumer support is aplenty but I believe Proton’s current woes has its roots from the day it started operations.
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The first is Proton was the only player in the protected domestic pool. Overseas, there was more than one domestic brand and this promoted healthy competition within the sector. Secondly, there is no time frame as to when the government is going to take away the crutches and see Proton take off like it’s supposed to. These two reasons combined created an opaque environment that has catastrophic long term results. Chiefly among them are:-
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- It breeds complacency as Proton did not have any external incentive to perform better. If you’ve watched the animated movie Wall-E where humans lived in space without any stress, you’d understand why Proton became bloated, unimaginative and cumbersome. Domestic competition in countries such as Japan and S. Korea allowed them time to improve while encouraging them to pay more attention to areas of quality and technological innovation as defined by market forces. Proton, on the other hand captured more than 70% of the Malaysian market within the span of the first few years of operation and this may have lead them to believe they can continue to dominate the market easily. It wasn’t until a young, upstart company assembling Japanese small hatchbacks named Perodua who knocked them off the charts did they suddenly realise that they are slacking so far behind.
- Differing specifications between domestic and export models. Being “jaguh kampung” is one thing; competing in the global field is a totally different thing and more often than not, the build quality for export models are higher, with better specifications. Sometimes this is done to comply with the import country’s automotive policies (for example emission levels). Now, contrary to popular belief, Proton isn’t the only company that does this. Hyundai and Kia also adopts such a policy and the Korean consumers complains just as much as Malaysians. The key difference is, Koreans have more than 1 company to pick. Prior to the arrival of Perodua, Malaysians have to stomach Proton if they want a cheaper car, regardless whether they liked it or not. It was market monopoly, plain and simple.
- Crony-cism festers. With so many customers complaining about premature failure of certain parts, Proton should be well aware of the common issues and can take measures to terminate suppliers of parts that does not make the mark. This crucial attention is what made the Koreans so strong today; they can accept that their product is not up to mark but will not believe that they can’t meet and surpass the expectation if due diligence is observed. But in Proton made vehicles, the problems persist and customers have to make repetitive visits to the SC to get those parts changed, some even after warranty period. Think about it: Power window defects were reported for decades and it wasn’t until almost 30 years later did Proton offer a permanent solution. How hard is it to identify which of the 4 major components (and their subsequent supplier) in the power window assembly that’s causing so much grief to owners?
- Management ineptness. Like any government linked companies, many top positions are reserved for – *ahem* “individuals with high political mileage” rather than their expertise in the field. It wasn’t until Datuk Seri Syed Zainal Abidin who had the appropriate automotive qualifications (ie CEO of Perodua at its peak) took the helm did Proton started to embark on marketing and product development activities that not only aims at restoring consumer confidence but addresses the profitability level of the company.
- Rising car prices. The one thing government can do to separate domestic and foreign car brands is to change the affordability level. In the form of taxation tariffs, many would assume that Proton gets special exemptions so charging high means higher profit for the company. That is not true; Proton, just like any automaker who has a CKD operations is taxed the same. What’s different is Proton (as well as Perodua) receives higher grants/rebates/subsidies than those other companies due to higher value added activities such as R&D. Foreign automakers exploit the base price set by Proton and Perodua and in an effort to improve their appeal and differentiate themselves from local manufacturers deliberately price their cars higher.
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The list goes on. As of 2013, Proton holds a market share of just 21.2%, the result of repetitive 2-4% annual market share erosion for the past 10 years. Tan Sri Khamil blames foreign car makers competition, poor public perception, lack of economies of scale and high cost of manufacturing being the key reasons why Proton hasn’t been doing well today. On that account, Mr Chairman is right. The question is, what’s Proton doing about it?
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Foreign competition
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For the past few years, the Malaysian Ministry of International Trade and Industry (MITI) has been scaling back on its influence on manufacturers, in line with the government’s change in automotive policy to be more open and allow market forces to govern the industry. This means industry players have a freer hand in determining their selling prices and compete more aggressively with one another. One of such example is Honda which has taken a more aggressive stance in positioning their makes against Toyota. Being the first company to set up a hybrid manufacturing plant in Malaysia is a key strategic move to unseat Toyota as the largest non-national car manufacturer for this country. Joining the fray are companies like NazaKia and Hyundai-Sime Darby Motors models against the Japanese and each other. Then, we have continental makes such as Peugeot, Ford and Volkswagen putting attractively affordable prices on their offerings in hopes of carving a share of the Malaysian automotive pie that is valued in excess of RM145billion. It is just unfortunate that Proton suffers high attrition losses due to the firefight between these (bigger) players who, in all likelihood did not even consider Proton as their competitor in the first place!
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Sorry Proton, it’s nothing personal. Just business.
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Sorry Proton, it’s nothing personal. Just business.
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Economies of scale and Exports
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With the Malaysian Total Industry Volume still falling short of 700,000 units, Proton will never be able to obtain optimum cost advantage if it relies fully on domestic market. This is something all car manufacturers should be aware of and coupled with the certainty of increasing cost of manufacturing, Proton needs to find ways to increase sales so that production can be ramp up for better economies of scale. The solution would be to look at both domestic and exports and every year. The board of Proton would come up and announce spectacular targets, to the delight of their shareholders – only to achieve spectacular failures come auditing period. I guess with Proton being a privately owned entity, you’d have less people getting fired for not performing up to mark. Then again, since when has Proton fired any of its executives for failing to meet targets?
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If price advantage is the position Proton wishes to take in positioning their models, then the 2 largest market in the world; namely India and China becomes a priority for the company. India in particular have attracted the attention of Nissan which has resurrected the Datsun brand for offering “cheap and cheerful” small cars. Volkswagen Group is also in the final stages of launching a new low-cost brand targeting specifically emerging markets. Where is Malaysia in those markets? With India, Proton was in negotiations with Delhi-based Hero Group but subsequent talks went nowhere. Not surprising because although affordable small cars account for about 60% of the total market, more than 25% of vehicles in India has diesel engines. Proton has been testing a Global Small Car with lots of local sightings but if it’s just aiming to overtake Myvi domestically while ignoring other countries and their competitors, it is a very limiting move. Furthermore, Proton has no key diesel technology to speak of so even if it does manage to enter India, it may not have the right product offering to gain a foothold there.
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China on the other hand has Youngman to market the Gen 2 and Persona and is rebranded as Lotus. We have no concrete data on the sales performance of Youngman but considering the Chinese domestic market is waking up with quality that’s approaching international standards, one wonders what if Proton has run out of time in establishing itself there, particularly considering Youngman is more interested in developing new models with Lotus Engineering instead of Proton. Come to think of it, there is nothing to stop Youngman from breaking up with Proton once they have their own models which they have full rights to.
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Last year in total, Proton exported less than 6,000 units worldwide. Instead of the board slamming tables, complaining about lack of gratitude by the consumers, it must ask itself how would it ever go about to achieve its projected 150,000 units by 2018. They spent millions, if not billions to research, develop, test and acquire new technologies like Petronas’ engine technologies back in 2012, testing the Detroit e63 fully electric Gen2/Persona (which I had the good fortune of spotting in 2011) since 2008 but where are they now? All dead ends?
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Proton’s only action these past few years is to spin off more variants of its product line-up then offering the most affordable Proton Saga SV in June 2013, subsequently reported a 42% increase in sales Q3 sales compared to the same period in 2012 largely because of it. Now the Chairman of Proton is complaining that the nett profit of each SV sold is less than RM500. Why did it take Proton a year to realize its decision to sacrifice bottom line profit for a temporary increase in market share?
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Poor public perception
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Such perception is not something that happens overnight and there is more than one contributing factor. As a person who grew up with the brand, here’s my observation;-
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- Proton started with less-than satisfactory quality and even worse after sales service. Consumers would bring their cars to the service center and complain of whatever-not problems. Then, because we’re all really nice and polite people, we say “Tak apalah” or it’s-ok. This willingness to accept (or produce) less than satisfactory products and services culture would not only fail to instigate Proton to become better, it became a stigma of “Biasalah” or what-did-you-expect, it’s a Proton. Sadly in the last 3 decades, no CEO or MD of Proton has been critical enough of the company to push it higher.
- Proton has and in all probability, will always be a low price offering. Unfortunately, that also comes with the psychological belief of you-get-what-you-pay; the cheaper it is, the less quality you’ll get. That being said, if Proton suddenly decides to increase the selling price across the board to address this issue, it’ll just send them to the grave sooner since no consumer would be willing to pay for things the do not perceive as improvements.
- International recognition, something that Proton sorely lacks these days. Until the recent Preve and Suprima S which had great Australian NCAP rating, the only other car that gained international notoriety was the Satria GTI. When it got rave reviews in Australia and the UK, people here were willing to pay a whopping RM80+k for a 2-door hatch. And it’s made by PROTON! Sadly, they don’t make cars like that anymore these days.
- Since DRB HICOM took over, there has not been any coherent branding exercise for Proton. When was the last time you heard an advertisement about Proton other than when they’re launching a new model? What was it about? Can’t think of any? The Thai distributor has complained that there hasn’t been any activity from Proton in their country. UK dealerships are complaining lack of stocks and marketing programs. It’s as though DRB HICOM is likening Proton to some sort of milk cow where it should sell by itself. Dear Tan Sri, even brands like Cadbury chocolates learned the hard way that even if they were the market leader, being cocky and not advertise allowed an upstart brand like Hershey to position itself as a viable alternative. by the time Cadbury realized, it was too late. And Proton isn’t even a market leader these days, not by a long shot. There is no excitement in owning a brand new Proton.
- Which leads to another branding conundrum; association of values. There is nothing premium about owning a Proton. Back in the early days, I’ve always been proud of the fact that Proton used Bahasa Malaysia to name its models. To me, it brought greater awareness to our beautiful national language. Then came pseudo-English words such as Savvy, Gen2, Neo, Exora, Preve and the ever infamous adult diaper, Suprima S. Presumably to appeal to a more global audience but to me, it has lost a key point of putting Malaysia in the world map. Today, if you buy a Proton, many would just conclude that you can’t afford anything better (unless you’re a Mat Salleh in which case, you’d just being a smart consumer ?Eh?)
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Future proposition of Proton?
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So where do we go from here? These days everyone seem to be an expert on what Proton should do. Least helpful are those suggesting that Proton should just close shop (like as if that’ll somehow drop every car model prices overnight). And there were those who vehemently oppose to Proton being sold to a foreign brand, citing loss of jobs as foreigners take over. The only people I see that should lose their jobs are non-performers who don’t realize or care enough to know their lackluster output is pulling the whole company down. Besides, do you know how expensive it is to bring expats to the country?
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Personally, I don’t believe in the-lowest-price-wins strategy because I think Malaysians as a whole is able and willing to pay for a fair price. There is little doubt that Proton’s quality standards has improved greatly compared to 10 years ago (but still has room to grow until it is of international standards) and with the addition of Lotus Engineering, the suspension part of most of its makes are sorted out, then the focus should be on three other areas:-
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Design, Engine Development and Product Line-up
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before embarking on an effective marketing campaign to highlight the key strengths of the new Proton.
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Design has always been a very subjective area but I think many would agree that the Preve and Suprima S design is “safe”. It’s a good start and the design theme should be enhanced and expanded to the other variants. Among the models being sold by Proton today, we can see three families; the Preve/Suprima S, Exora/Saga and Persona/Neo (let’s just say the Inspira is a stepson). What should the future face of Proton should be? Or why not just start from fresh? Get someone with the credentials of Peter Schreyer and redesign Proton.
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In the engine area, many have remarked that most Proton engines are fuel guzzlers to just moderate. Hardly anyone calls a Proton model fuel saving and I suspect it may have issues meeting EU emission standards which could partially explain why exports to Europe is low. With the increasing cost of living, having a frugal yet adequately powered vehicle is much appreciated.
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Proton has 8 models being sold today;-
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2 are mid-sized MPVs (Exora & Exora Bold)
2 are B or B+ segment sedans (Saga and Persona)
2 are C segment sedans (Preve and Inspira)
2 are hatches (a 4 door Suprima S and a 2 door Neo)
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There is no other auto manufacturer – in the world – that has such a fragmented, cannibalistic product line-up. How are you going to yield effective economies of scale in parts sharing, warehousing and logistics? Or which model do you focus on when creating a marketing campaign? All this serves not only to confuse a new buyer, it also makes it a headache for all staffs dealing with product planning and management. Identify which are the better performers and wind down the rest, improve the technology and reliability till the point where our local rally boys can trash the car and still come out thumbs up while concurrently enhance QC to further drive down defects. And between them all, get someone to design a car that will truly stir the spirit of Malaysia and this time, please do a proper long term marketing campaign to shift the poor perception Proton has, both locally and internationally. Because having the best product in the world means nothing if no one knows and appreciate it.
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P.S: Special mention to Hans Cheong of LiveLifeDrive who provided great insight from his articles HERE about Proton failing oversea targets and HERE about how oversea domestic automotive market started and grew. Do read those 2 excellent pieces if you’ve not grown mushrooms on your head reading this. Also special thanks to ChipsYap of Motortrader whose market knowledge is unparalleled
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7 Comments
Spot on.
Proton has been here for such a long time, started at the same time as Hyundai Kia.
Walk into a Kia Cerato and then walk into a Proton Preve. The difference in quality is immense. If not for the taxes, the Cerato and Preve compete at the same price.
Make a good quality car, people will buy. Look at the Koreans, we buy them now cause they make good cars. Also, I don’t see how we are “obliged” to buy a Proton and support it, after all, our hard earned cash, we can do what we want.
Things Proton needs to do:
1. Kill off the aged models. Get new fresh designs.
2. Put that Petronas engine to good use. Keeping it till the cows come home ?
3. Concentrate on quality and safety. I’d gladly trade the Android HU in the Suprima for something like Toyota build.
4. Ditch Campro, CPS, CFE, whatever. Just no. And get rid of that horrid CVT too.
5. Try not to have too many models. Just do a B segment sedan/hatch, C segment sedan/hatch and an MPV. No point having 100 models but none are proper.
The mentality of Proton is such that each model is contributing a significant amount to the coffers. For example, last year it sold more than 138k units. We don’t have the breakdown of the models but I suspect each of those “aged models” are still yielding 5 figure sales numbers which, translated into monetary terms is of a significant value. If you kill those models prematurely, you would not only limit the number of offerings your company has (despite the offerings providing the same solutions), sales numbers would definitely take a plunge. It is a chicken/egg thing; Proton is paranoid of letting go models that still can sell, further weakening their market position vs streamlining its product portfolio and concentrating on improving quality on models that has significant long term implications to the brand.
As for the Petronas engines, I suspect a lot more work needs to be done on them. I doubt it was the finished product when Proton took them over; you’d still have lots of reliability, compliance, safety and whatever other regulatory tests hurdles that needs to be overcome before they can roll them out. Being hit by a major recall would probably doom the already weakened brand.
If that’s the case, it’s deja vu all over again for Proton as this was the similar problem Proton faced a decade ago when it relied on dinosaur models such as the Saga LMST and Wira when sales of the new Gen-2 and Savvy was horrid.
If this conundrum continues, we might see the current Saga to soldier on until 2020. The Saga was only limited to Mysian market and I not sure if the S16 will still find buyers in the Ozzie market. It should be sold in emerging markets in India, but it didn’t. Shame.
Yet again it is not too late as the GSC may shake things up for emerging markets, hopefully.
Very well thought write up Kenso.. hope it is still not too late to renovate P1 and achieve greater height ..
Great article as always, Kenso.
I got a hand-me-down 17 years old 1st gen Iswara from my dad when I started college. Changed to a Viva when I started working because the Iswara was just too old a dog to carry on its duties. But a good old dog nevertheless. And then now a Polo Sedan after getting married as safety and practicality are more important than a small size car with no airbags or ABS to zip around town. Of course, comparing the 3, the VW is the best to drive. But it is also the most costly. Oh btw, I did read your review before signing on the dotted lines for the VW 🙂
However, my point being, after having chatted with friends and relatives on multiple occasions, we do give Proton a deserving credit. They make darn good and cold airconds! One of Proton’s ex-CEOs even acknowledged it during the now-defunct late night show Latte@8, “We agree that quality is an issue, but you guys have to give us credits for scoring on the aircond system.”
Now that the Koreans have surpassed Proton in the international market although they all started at around the same time, it is TIME for Proton to rethink its strategies and to rework its vision to not just score as a Village Champion.
As what most old Proton cars on the road need nowadays, Proton itself needs a major OVERHAUL. One that will redefine this company should it still wishes to stay in business. Good Luck I say to thee.
what I really need from proton is improved interior quality and ambiance and better fuel consumption. and also, please ditch those ‘handling by Lotus’ trademark..you own them, just integrate the technology..besides, there’s no need for you to market another brand on your car..that’s confusing..
I still have high hopes in proton since it’s our local product. But seriously, ditch those lousy vendors..it’s been decades already man!
Serious electrical problems with my Proton Gen 2 – 2007:
1. Door locks not always reacting, so I cannot close it with my remote, too afraid cannot get it open again. The key lock on the driver side is long time a gonner
2. The engine starting reving for no reason at all (I mean reving up to 4000), and all that is killing it is if I switch it on and of (very fast) about 6 times while driving or at stop street
3. Gas meter is showing 100% fuel in the tank, next moment it drops to 25%, next moment to 0% and next moment 50% (that’s after I filled it up) Most of the times it’s on 0% – trip computer correlates with this problem also
4. The timming belt tensioner just came loose one day and bend valves, which cost me a lot of money to get repaired.
Its the worst car I ever had, cannot trust it for 1 second
I suppose I will not hear from you or anyone anyway, so I don’t know why I am wasting energy writing to this forum