TIE UP WITH HONDA SET TO DRIVE PROTON AND HAVE HUGE SPILLOVER

EFFECT ON LOCAL AUTOMOTIVE INDUSTRY

INTRODUCTION- PROTON & HONDA JOINT VENTURE PARTNERSHIP [click to read article]

The recent partnership of Proton and Honda might just be a prelude to an extensive plan laid out for Proton that would ripple through the entire supply chain and vendors of the local automotive.

Having the right to control Proton, DRB-Hicom had also indirectly dictated the plans of some of its subsidiaries that are Tier-1 vendors and suppliers in the local automotive supply chain.

Not only do these subsidiaries supply to Proton, they also control a huge portion of the supply chain for key original equipment manufacturer (OEMs) like Perodua, Volvo and Toyota and also boast Toyota Saudi Arabia as a customer.

MACROECONOMIC INFLUENCE FACTORS- EMPLOYMENT AND ECONOMIC GROWTH

Proton’s growth will send a huge spillover effect to the local automotive supply chain besides creating more jobs market as well as also sees new breath of business opportunities for vendors and suppliers.

   

The arrangement may pose a challenge towards Perodua and Toyota in terms of market leadership in Malaysia as both has reaped the rewards of having a strong foreign partner. Its cars are selling well and it manages to get access to newer technology from its relationship.

Sharing platforms, product line-ups and technology can lower the cost and offer a more competitive price. This is important as competition and the ever increasing liberalization of auto industry means that the pricing gap can narrow. An example is a Nissan Almera which is priced from RM66,000 to RM80,000 is within touching distance of what Proton’s cars are priced at.

Without the economics of scale and lower manufacturing cost, it will be difficult for Proton to compete in the affordable car segment as rivals encroach on the price comfort zone that the national car maker has enjoyed for years. Also, with Honda’s transfer technology to Proton, opportunities are there for Proton to develop some engine jointly for local market and go global with Honda.

CONCLUSION

  

The important aspect of the tie-up is to ensure Proton survives and continued to exist as Proton is essential under National Automotive Policy. The carmaker is an employer that influence directly and indirectly the welfare of a great number of workers and their families. In the end, the partnership should be about the progression of Proton. It should use the deal as a means to grow itself as an original equipment manufacturer, a maker of cars not just for the domestic marker but one that is exported around the world.