Proton vendors struggling to keep up with Chinese manufacturers
One of them says local vendors are unable to compete with China’s mass production.
Six months after China’s Zhejiang Geely Holding Group bought a 49.9% stake in Proton Holdings Bhd, local vendors say they risk losing their business to competitors if they do not minimise costs and improve quality, The Malaysian Reserve (TMR) reported today.
However, this may not be possible for some.
A vendor at a seat upholstery company told the portal that Chinese manufacturers could produce leather seats at only 50% of the cost.
“We can’t compete with that kind of cost due to the mass production in China,” he was quoted as saying.
Another vendor said they would have to find business partners in China if they were unable to meet Proton’s objectives on their own.
Exiting the business would be the last option, the vendor added.
Quoting industry sources, the report said many Tier-1 Proton vendors were currently visiting Geely and its vendors’ factories in order to explore China’s Tier-1 market and look into possible joint ventures with automotive suppliers there.
Concerns over the impact of Geely’s 49.9% acquisition on Proton vendors were raised as early as May, when PKR’s Wong Chen asked if the China-based carmaker would control the auto parts industry in Malaysia.
Last month, Proton told its automotive parts suppliers to cut prices by 20% to reduce production costs and ensure that vendors remain competitive.
TMR quoted a source as saying vendors felt they could lower prices if Proton could guarantee higher orders, as was being done by Perusahaan Otomobil Kedua Sdn Bhd (Perodua).
Under the RM460.3 million deal with Proton’s parent company, DRB-Hicom Bhd, Geely is expected to lend expertise in the areas of production, manufacturing, operations and marketing to Proton.
In 2001, Proton, which benefited from decades of government support and bailouts since its inception in 1983, had a market share of 53%. Last year, Proton’s market share stood at 14%.
Last April, the government gave Proton RM1.5 billion in financial aid on the condition that it implements a turnaround plan and finds a foreign partner to assist in research and development.
PKR fears impact of Geely deal on Proton vendors
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