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  1. 1. MARKET SUMMARY Proton is the Malaysian national automobile manufacturer (Malay acronym forPerusahaan OTOmobil Nasional, National Automobile Enterprise), which was establishedin 1983 under the direction of the former Prime Minister, Dr. Mahathir Mohamad. ProtonHoldings Berhad, the holding company, is listed on the Bursa Malaysia. Based on technology and parts from Mitsubishi Motors, production of the first model,the Proton Saga began in September 1985 at its first manufacturing plant in Shah Alam,Selangor. Initially the components of the car were entirely manufactured by Mitsubishi butslowly local parts were being used as technologies were transferred and skills were gained.The 100,000th Proton Saga was produced in January 1989. Until the end of the 1990s, the cars logo featured the crest from Malaysias coat ofarms, featuring a crescent and a fourteen-pointed star. The new Proton logo features astylized tiger head. In 1993, a model called Proton Wira was introduced based on theMitsubishi Lancer/Colt. More than 220,000 units were sold between 1996 and 1998. ProtonPerdana, based on the Mitsubishi Galant/Eterna, was first produced in 1995, intended forhigher end market. The Proton Waja (Proton Impian in UK), which launched early 2001, isthe first car model designed internally by Proton. By 2002 Proton held a market share of over 60% in Malaysia, which was reduced tobarely 30% by 2005 and is expected to reduce further in 2008 when AFTA mandatesreduce import tariffs to a maximum of 5%. (See "Trivia" section for update on tariffimplementation) With the acquisition of Lotus technologies in 1996 from ACBN Holdings (a companyowned by the owner of Bugatti), Proton has gained an additional source of engineering andautomotive expertise. This led to the production of Proton Gen-2 which was code nameWira Replacement Model (WRM) before the launch. The Gen-2 is the first of cars to bemanufactured and assembled at the new manufacturing plant in Tanjung Malim, Perakwhich is part of Proton City development project. The plant was opened in 2004.
  2. 2. On 8 June 2005 Proton introduced the second model to be manufactured in TanjungMalim, the 1,200 cc 5-door supermini, the Proton Savvy. Both the Gen-2 and Savvy, weremodels that MG Rover was looking to rebadged when the British firm entered intocollaboration talks with Proton. However these joint-venture talks were unsuccessful andMG Rover subsequently collapsed. In 2007, Proton launch its new sedan as replacement version for Wira Sedan but withnew name, Persona. The new Proton Saga replacement model (codename Proton BLM)was launched on 18 January 2008. The new Saga is based on the Savvy platform, but usingCampro 1.3L instead of Renault engine. It was announced on August 8, 2008 that Proton isdeveloping a new, fuel-efficient hybrid car to beat rising costs and address environmentalconcerns. Prime Minister Abdullah Ahmad Badawi told reporters that he had alreadytest-driven the car and urged the company to continue researching energy-savingtechnologies. As of 3 August 2008, Proton has produced 3 million cars since 1985, where the 3millionth cars is a second-generation Saga.TARGET MARKET Proton has exports cars to the United Kingdom, South Africa, and Australia and thecompany is aggressively marketing its cars in several other countries including the MiddleEast. Besides that, Proton cars has also been exporting a small volume of cars to Singapore,Brunei, Indonesia, Nepal, Sri Lanka, Pakistan, Bangladesh, Taiwan , Cyprus and Mauritius.14,706 Proton cars were exported in 2006. Recently Proton returned to Guangdong, China,where it did business in the past but withdrew after having poor sales record. In July 2007,Proton signed an agreement with Youngman Automobile Group Ltd. Co., paving the wayfor the national carmaker to offer its products and services in China. Under theagreements,Youngman will import 30,000 Gen.2 CBU (completely built-up) units andresell them under its own EuropeStar brand and eventually develop a new range ofMade-in-China cars with the engineering services provided through Protons Lotus. Proton
  3. 3. is expected to ship 1500 cars a month for 20 months starting December 2007 to fulfill theorder. Proton began its exports from Malaysia to other right hand drive markets like NewZealand in the late 1980s to fulfill consumers needs based on culture situation, but itssuccess was mostly limited to the United Kingdom where it entered the market, along withIreland, in 1989. They advertised there with the slogan Japanese Technology, MalaysianStyle. Proton cars proved popular among budget-oriented motorists, and like Japanese andSouth Korean models before them, led to the demise of manufacturers such as the SovietLada and ex-Yugoslavian (now Serbia) Zastava. By the 1990s, Proton had withdrawn fromthe New Zealand market after offering only the Saga four-door and Persona five-doormodels. The company also exited the Irish market in the early 1990s, following limitedsuccess in that country. The Persona and Natura models were sold in Chile briefly duringthe late nineties by a local Nissan importer, but few were sold and the venture ended aftertwo years. Proton sales seem to be slowly declining in the United Kingdom with 2008 salesat 1518 (0.07% share of the market), compared to 2752 in 2002. These figures areinsignificant compared to 2008 UK sales of 28,036 for Koreas Hyundai and 29,397 forSpains SEAT. Proton also exports cars to Singapore and Australia, and now produces models inleft-hand drive, for export to continental Europe. An entry into the US market wasconsidered by Malcolm Bricklin following Hyundais successful launch in the mid 1980s.However, exports to the US never materialized, as the cars required hundreds of changes tomeet American safety standards in order to secure coverage from auto insurers and satisfylegislative requirements. Proton export models still do not comply to all environmentalstandards such as emission limits. The model that Malaysia has followed with the formation of Proton may be used as acase study for rent seeking as tariffs on imported cars rose almost immediately followingthe formation of Proton. Also AFTA agreements on relaxing entries into the ASEANmarket space had exemptions specifically for Proton. The Malaysian government gained a
  4. 4. three-year exemption for Proton from 2002 to 2005 where entry tariffs had to be lowered to5%. This was replaced by other duties resulting in no net decrease in automotive prices forimporters. In the United Kingdom, Proton cars suffer somewhat from a poor public image. Theyare considered deeply unfashionable with younger drivers, they are identified as being avehicle popular with elderly people. In 1998 Proton attempted to change this byintroducing the Proton Satria GTi however, the car was somewhat out of reach to youngerdrivers due to high insurance premiums. The Satria GTi also sported a "Lotus Ride &Handling" badge which, coupled with an average security system, made it easy picking fora potential thief. However, the vehicle was a success as far as handling was concernedwhich meant that, coupled with its 1.8 16-valve Double Overhead Cam Engine (whichproduced 133bhp) a number were purchased by Octogon Race Circuits and used as trackcars at Silverstone and Brands Hatch racing circuits. Proton cars were imported into Trinidad and Tobago between 1993 and 2002. Theywere sold through a local dealer, H.E Robinson Ltd. Only the Saga and Wira ever reachedthis market with the Wira enjoying modest sales success. The bankruptcy of the dealershipforced the exit of Proton from Trinidad and Tobago in 2002.MARKET GROWTH Proton market growth have been drop in 2006, Protons sales dropped 30.4% from166,118 in 2005 to 115,538 for the Malaysian market, with a later report indicating a 55%fall of sales to 962.3 million ringgit, its lowest in at least seven years. This allowed Peroduato overtake Proton as the countrys largest passenger carmaker for the first time, with a 41.6%market share, while Protons market share fell from 40% in 2005 to 32% in 2006. In theperiod ending December 31, 2006, Proton has also suffered three consecutive quarterlylosses. Compared to a profit of 86.5 million ringgit in 2005, the car company lost 281.5million ringgit in 2006. Proton blamed discounts from rivals. Total losses in 2007sfinancial year climbed to $169 million. The Employees Provident Fund (EPF) acquired an
  5. 5. additional 830,000 shares in a transaction that spanned between January 5 and January 12,2007. In 2008 improved performance was achieved on the back of increased revenues toRM5.6 billion compared with RM4.9 billion in the previous year. The increased revenuegenerated from increased sales volume, was mainly due to the introduction of PROTON’stwo new models, the PERSONA and the SAGA. The group has also benefited from itsrevenue diversification program with income from sale of rights for use of its intellectualproperty, in its export markets. PROTON understands the importance of introducing newproducts and models that meet the expectations of the market. This is clearly demonstratedby the good reception to the PERSONA and SAGA. As such, PROTON is committed tofurther enhance its R&D and product development activities with a view to further invest inprojects that meet the requirements of the market and allow for quick commercialization. Inthe last financial year alone, PROTON spent over RM500 million on R&D projects andactivities, in-line with this philosophy. For the current financial year ending 31 March 2009,given the new product range, PROTON expects to significantly improve its exportsperformance further. The PERSONA and SAGA are planned to be launched in PROTON’smajor export markets from June 2008 onwards.
  6. 6. SWOT ANALYSISStrengths Ties with other ASEAN markets are strengthening all the time through AFTA inducedtariff reductions, which will provide advantages for carmakers basing themselves inMalaysia. The market continues to attract investment from major carmakers, with GeneralMotors (GM) forming a tie-up with DRB-HICOM in August 2007. In addition to successes in product portfolio, Proton has also made commendableprogress to bring about other operational improvements. The focus on cost managementresulted in cost savings for new models, which were then passed on to the customersthrough competitive pricing. Emphasis on the elevation of the automotive eco-system saw the strengthening of thevendor base and dealer network. These rationalization initiatives enabled Proton togetherwith vendors and dealers to deliver improved quality of service and be more competitive. Proton will continue to strengthen itself in all aspects to operational, financial andcorporate to better equip itself in the years ahead. It will adopt a three-pronged thrustnamely development of market-driven products, focus on high growth regional markets anda production strategy that achieves economies of scale.Weaknesses The national industry is in decline, with Proton losing market leadership for the firsttime in 2006 (albeit to fellow national producer Perodua). Protectionist measures are stillbarring new entrants; particularly Chinese manufacturers such as Geely Car ownershiplevels are relatively high at one car for every four people, compared with one for every 30in neighboring Thailand and Indonesia After that, the existing quality issue can affecting brand image caused by active service
  7. 7. units such as political interference by Tun Porsche on vendor selection, appointment of topmanagement and design. Plant utilization low can also inability to retain and cultivatetalent, inability to introduce real new models, no economies of scale, inability to penetrateexport markets, inability to satisfy customers needs, no sense urgency, corporategovernance and complete numbness of developments in the auto industry. Funds shrinkagecan influence result in Proton inability to introduce new models.Opportunities The entry of Danish vehicle tuner Kleeman could provide a boost for the premiumvehicle segment. Proton’s export plans could help to offset its declining domestic influenceand improve its global performance. Faced with declining domestic sales and uncertainty regarding a strategic partnership,Malaysia’s Proton has set its sights overseas. The company is evaluating a plan to build aproduction plant in Egypt, which would act as a gateway to Africa and West Asia and boostthe carmaker’s exports. Proton already sells its Gen. 2 and Savvy models in Africanmarkets, such as Egypt and South Africa, confirming that a market for the company’smodels already exists. According to Proton Managing Director Syed Zainal Abidin SyedMohamed Tahir, Egypt provides a large market but could also act as a base to countriessuch as Saudi Arabia and Sudan. Starting in November 2007, Proton also plans to sell 30,000 units in China byend-2008. The models will be sold under the Europestar brand by distributor YoungmanAutomobile Group, which was appointed in July. Proton will initially export completelybuilt units (CBUs) to China, although this will change to completely knocked down (CKD)kits for assembly from mid-2008. Talks with Indian distributors are underway but noconcrete arrangements have been made. Elsewhere in Asia, Proton has also appointed aThai distributor. Phranakorn Auto Sales will initially sell Proton models in 20 dealerships,with the network due to double within four years.
  8. 8. Threats Malaysia’s trade dispute with Thailand over non-trade barriers in the automotiveindustry could hamper the export projects of major carmakers Burgeoning capacity levelsof around 700,000 units could result in a supply glut Thailand’s ‘Detroit of Asia’ strategythreatens other manufacturing bases in the region. Other than, Proton and Perodua has been at each other’s heels since December 2006when Perodua outsold Proton in monthly sales by 99 cars. Perodua’s lead was short livedwhen Proton outsold Perodua the following month by 550 cars. In February, Peroduaoutsold Proton again, beating Proton monthly sales figures by 763 units. This time however,the Malaysian Automotive Association reports that Perodua’s monthly sales have toppedProton by a massive 4,284 units, making it have a market share of 44% (13,574 units) asopposed to proton’s 30.35% is 9,290 units. For every Proton Savvy sold by Proton, Peroduasold Perodua Myvi. The Myvi has proven to be a stunning success.COMPETITOR ANALYSIS Malaysia has become a hotbed of production activity in recent years thanks to a raft ofnew assembly licences granted to international manufacturers. According to Mahaleel Ariff,chief executive of stateowned Proton, Malaysia’s output capacity has now reached 700,000units, of which his company and fellow national Perodua account for 500,000 units.However, production fell from 563,408 units in 2005 to 503,048 units in 2006. Thecompetitive position of state-owned carmakers Proton and Perodua has remained a keyfocus for the Malaysian automobile industry in recent years, with the two firms’ combinedmarket share declining. Proton has been particularly hard hit. A bloated workforce and alack of new models have not helped the firm, with the double-edged sword oflong-standing government protection militating against efficiency. In 2006, the companylost leadership of the market for the first time, falling behind Perodua. After that, leadership of the passenger market shifted for the first time ever from
  9. 9. national manufacturer Proton to local rival Perodua in 2006, as the domestic giant’s salesfell by 30%, to 115,538 units or 32% of the market. Perodua, on the other hand, increasedits sales by 14%, to 152,733 units, boosting its market share from 32% in 2005, to 42%.The overseas brands saw their combined share of the passenger market fall slightly from 23%in 2005 to 22% in 2006. In terms of total sales for all segments, Perodua again made itsmark, claiming 32% of the market from sales of 155,419 units, while Proton trailed with 24%from sales of 115,706 units. Toyota’s share of the total market is double that of itspassenger car share with 16.7% with Honda pipped for fourth place by local firm Naza on6.5%, against the Japanese brand’s 5.4%. The competitive environment category measures the opportunity for new marketentrants, based on existing manufacturers and brands in the country. Despite increasingnumbers of carmakers launching production activities in Malaysia, some majormanufacturers are still absent leaving opportunity for extra competition. The market scores5 out of 10. Another that, competitor is Toyota Motor Corporation; Honda Motor CompanyLtd.; Shenyang Brilliance Automotive Company Ltd.; Mitsubishi Motors Corporation;Yuejin Motor Group Corporation; Hyundai Motor Company Ltd.; Mazda MotorCorporation; Daewoo-FSO Motor S.A.; Isuzu Motors Ltd.; Kia Motors Corporation andToyota Astra Motor PT. Finally that, Perodua’s successful tie-up with Japanese manufacturers, as well as anemphasis on small, fuel-efficient vehicles, allowed it to overtake Proton in passenger-carsales in 2006. It outsold Proton in the domestic market both in 2006 and 2007. However, itssubcompacts do not directly compete with larger, more expensive Proton offerings. Thecompany has 140 sales outlets and 37 service branches and 113 service outlets acrossMalaysia.
  10. 10. Product Offerings- Proton Saga (1985) - Proton Juara (2001)- Proton Iswara (1992) - Proton Waja (2001)- Proton Wira (1993) - Arena (2002)- Proton Staria GTi (1994) - Gen-2 (2004)- Proton Putra (1995) - Proton Savvy (2005)- Proton Tiara (1996) - Proton Persona (2007)- Perdana V6 (1998)Proton Saga (1985)The Proton Saga is the first car produced by Malaysian auto manufacturer Proton.Originally based on the 1983 Mitsubishi Lancer Fiore, the Saga first debuted in September1985 and retained its core Fiore design for two decades, before a successor designedin-house by Proton was launched to replace the ageing platform in 2008. Since 1985, theProton Saga and its variants contribute to most of Protons sales and revenues. The Saga isalso the longest surviving model produced by Proton, soldiering on for nearly 22 years.Proton Saga Iswara (1992)In 1992, the Saga was given a facelift and its name expanded as Proton Saga Iswara (alsoknown in short as Proton Iswara), after a species of butterfly. Modifications includedslimmer headlights, plastic bumpers, side mouldings, coloured door handles, groovedtaillight clusters and rear number plate repositioned to the bumper. This particular model is
  11. 11. used as taxis in Malaysia and some are converted to NGV. Due to the modification, bootspace was reduced by half to accommodate the NGV tank and there are only a few petrolstations by Malaysian oil-giant Petronas.Proton Wira (1993)The Proton Wira is a car manufactured by Malaysian carmaker Proton, released as afour-door saloon and four-door hatchback beginning 1993. The Wira was intended as anewer alternative to the Proton Saga Iswara, a facelifted version of Protons first model, theProton Saga, as a flagship compact model for Proton. The Saga continued to receive minorupdated until 2008, when a second generation Saga was introduced as a sub-compactmodel instead.Proton Staria GTi (1994)The Proton Satria was a hatchback produced by Proton. Production started in 1995 for thefirst generation and ended in 2005. The new Satria Replacement Model (SRM), known asProton Satria Neo was launched on 16 June 2006. The name Satria which means knight inSanskrit was chosen for Protons 3-door hatchback to reflect the sportiness of the car.Proton Putra (1995)
  12. 12. The Proton Putra is also sold in the United Kingdom and Australia as the Proton Coupe orProton M21. After that, the car is a 2-door sporty coupe based on the Mitsubishi Mirage.Considered by many as one of the better looking of the Mitsubishi-based models, the Putrawas well-received and commands good second-hand value.Proton Tiara (1996)The Proton Tiara was a supermini class 5 door compact car based on the Citroën AX. It wasbuilt under licence from PSA Peugeot Citroën by Proton from 1996 to 2000. The Tiara waspowered by a 1.1L engine and featured a different grille, tail lights and bumpers than theCitroën AX. Its successor is the Proton Savvy.Perdana V6 (1998)In 1999, Proton shoehorned a 2.0 L 6A12 V6 engine (also sourced by Mitsubishi) into thePerdana. The so-called Proton Perdana V6 also had a new bodykit and 16" rims. Theoriginal Perdana soldiered on for a short while before it was dropped. With Lotus-tunedand upgraded suspension settings, the car handles well through tight corners and it is agood high speed cruiser.Proton Juara (2001)
  13. 13. The Proton Juara was a microvan produced by Malaysian carmaker Proton between 2001and 2003. The design and production of the Juara marked a notable departure from Protonstraditional preference towards saloons and hatchbacks, making the Juara the first van to bemanufactured by Proton. In its marketing campaign, Proton decided that the Juara isessentially a Mini-MPV (Multi-Purpose Vehicle) and became the platform in its advertisingand promotional campaign.The vans name was derived from the Malay language, meaning"champion".Proton Waja (2001) The Proton Waja (Proton Impian in Europe) is the first Proton to be designed andstyled in-house. However, the cars chassis and engine were sourced and adapted fromMitsubish (except for the 1,800 cc variant, which was powered by a Renault engine). Theword Waja translates into English as "steel" while Impian translates into "dreams" or"ambition". The name Impian was chosen as it was considered to be a more pleasantsounding word for the international market. In January 2006, the car was fitted with a Cam Pro engine which has been re-tuned toboost the horsepower to 86 kW (115 bhp) and 155 N-m of torque. This made it gofull-circle, as the CamPro was originally developed for the Waja, but was deemed notready for production when the Waja was launched, hence debuting in the Proton Gen-2.The facelifted 2007 Proton Waja was launched on 19 January 2007 with the new grillenearly identical to the Proton Savvy. The Waja was also released as the Proton Chancellor in late 2005, a variant for theexecutive market with a 250mm wheelbase stretch and luxury fittings and accessories,including a space-robbing rear centre console that restricts seating to four persons. It isfitted with powertrain from the Proton Perdana V6. With a selling price of about twice thatof a Waja, the Chancellor is a very rare sight on Malaysian roads.
  14. 14. Arena (2002)The Proton Arena (or the Proton Jumbuck in the United Kingdom and Australia) is a smallfront wheel drive coupé utility manufactured by Malaysian automaker Proton. Introducedin 2002, the Arena is the only form of pickup truck by Proton, and is the only Proton modelto enjoy significantly more popularity in its export market than domestically.Gen-2 (2004) The Proton Gen-2 is the first fully Malaysian-developed (including chassis and engine)Proton car and the replacement model for the Proton Wira; launched on February 8, 2004.Proton still continued to sell the Wira after the Gen.2 was launched, due primarily to thepopularity of sedan/saloon vehicles in the target market. The Gen.2, a hatchback design, isconsidered by many to be the best-looking Proton. It has a minimalist and modern interiorwith design cues from the Lotus subsidiary. However, very low quality of materials and fitand finish of interior components seriously hurt the publics perception of the quality of thevehicle at launch. Later models used improved quality materials and assistance from theTUV of Germany to help maintain the quality improvements. The Gen.2 was the first Proton to receive the (inappropriately) named CamPro engine,which at launch was widely criticised for the lack of low- to mid-range torque (pullingpuwer), due to a late decision to drop Camshaft Profiling from the engine feature-list inproduction models. Attempts to improve this torque deficit by adjusting ECU parameters
  15. 15. have largely been unsuccessful. Published engine torque curves still show a pronounced dipin torque output in the crucial 2000-3000 RPM engine speed region, presumably due to themissing engine feature.Proton Savvy (2005) The Proton Savvy was launched on June 8, 2005. The 1,200 cc 5-door supermini car.The car is fitted with an engine and a gearbox sourced from Renault. In an official on-roadtest made by Proton in mid-2006, Proton Savvy recorded the fuel consumption rate ofabout 24 km/L at constant speed of 90km/h (or about RM0.08/km of fuel), making the caras the most fuel-efficient Malaysian car as verified by Malaysian Book of Records. Evenwith very good fuel efficiency the car maintenance were reportly to be very high evensurpassing the Proton Waja. This is because of the use of the European Renault engine.Proton Persona (2007)The Proton Persona was launched on 15 August 2007. The 1.6 liter sedan is based on theProton Gen-2 and features a sedan body instead of the Gen-2s hatchback body. It retainsthe same 82kW Campro engine. The Persona is rebadged as the Proton Gen-2 Persona inthe UK market.
  16. 16. CRITICAL ISSUES/ CHALLENGES The Proton badge today does not carry much brand equity. Many view Proton as amaker of cars that lack excitement but which are relatively cheap compared with Japaneseor South Korean makes. The company needs more desirable models like the Persona, which has helped inreviving sales, and would have to maintain its recent improvements in quality as that wouldhave a strong bearing on its acceptance level. Protons Campro engine, which is the main staple of its product line, is hardlycutting-edge given todays technology. Proton also lacks an engine or platform to expandinto the SUV and MPV markets, or the 2.0-litre and above segments. Proton may need tocollaborate with a foreign partner much in the way BMW and PSA Peugeot-Citroen areworking together to develop new engines and technologies. In the longer term, many of the green engine technologies that are emerging as a resultof rising fuel prices and global warming would dictate the direction of automotivedevelopment, and these are beyond Protons capabilities. It is of some comfort, therefore, tolearn that the Government is still willing to consider a strong strategic foreign partner in thefuture. On its own, Proton has limited funds for research and development. And the bulk of itsexports are mostly confined to less mature markets, including China and some GulfCooperation Council. A tie-up with a strong foreign brand will enable Proton to penetratemore discerning markets. But how many foreign stakeholders would be willing to invest the money in Proton todevelop new infrastructure and facilities and share their latest technology without beinggiven a substantial or controlling stake in the car maker? That is a matter for theGovernment to ponder on when the time comes.
  17. 17. MARKETING STRATEGYMARKETING OBJECTIVE PROTON commands a substantial share of the domestic market for passenger cars andover the years has been building up distribution networks in key market centres across thefour regions:• South-East Asia,• the Middle East,• United Kingdom / Western Europe, and• Australasia. The main business activities of the Group encompass vehicle engineering, research &development, manufacturing, distribution and after-sales services. The Group is alsoinvolved in financial services and property management in supporting the main businessactivities. The Group designs and produces cars for diverse consumer preferences. T he portfolio of PROTON models includes the reliable family-sedan Waja, the stylishGen.2, the elegant Perdana V6, the versatile Arena, the proven Saga range, the fun-to-driveSavvy, the desirable sporty Satria Neo and the „2008 Best Model of the Year‟ winner, thePersona. The Group also has in its portfolio, the world-renowned Lotus sports cars,withmodels such as Elise, Esprit, Exige, Europa and the recently unveiled Evora (which will beavailable in the first half of 2009) to suit a range of customer demands and preferences. TheGroup conducts research in its centres in Malaysia and the United Kingdom on newtechnologies to create cars that are unique in both design and driving performance. ThroughLotus, the Group provides comprehensive and versatile consultancy services to many of theworld’s OEMs and Tier 1 suppliers. Currently, the Group has almost 12,000 employees who are involved in the wholevalue chain of the business, from research, design, development, testing, stamping, casting,
  18. 18. machining and assembly to marketing, distribution and after-sales services. Strongcustomer orientation and competitively priced products are the foundation of our businessand essential to our success. We aim to maintain market leadership by continuing todevelop innovative products and satisfy our customers needs better and enhanceprofitability.MARKET SEGMENTATION Quality is about customer satisfaction and meeting customers’ expectations. It isindeed challenging, to say the least, to improve quality in the market given theever-changing expectations and quality perception among car buyers today. As such, thekey to improving quality in the market is to understand the needs and perceptions of ourcustomers. Towards this end, the Group established a ‘Voice of Customer’ framework to facilitatefeedback on quality issues from the market. This is vital in order to establish quick andeffective counter-measures to resolve critical quality issues in the market in a timelymanner while preventing recurrence of the quality issues in future models. During the year under review, a new feedback mechanism called Customer PriorityIndex (CPI) was introduced with the aim to help drive and resolve quality issues in themarket. CPI is a matrix that calculates and prioritises customer feedback based on aspectssuch as technical data, warranty claims and severity of the quality issue. The Group alsogauged feedback on product quality in the market via indicators such as concerns per car(CPC), delivery quality defect-per-unit (DPU) and warranty provisions. On this scoresince the Persona and new Saga were introduced into the market,customer complaints have reduced significantly and quality perception for PROTONproducts has greatly improved as reflected in the notable improvements in the CPC andDPU levels. Additionally, from the market feedback gauged via warranty provisions and
  19. 19. Product Quality Report (distributors’ feedback), we have recorded remarkableimprovements that reflect PROTON’s strong commitment to satisfying our customers’needs.MARKET POSITIONINGLaunch of New Products The engine of growth for any car manufacturer lies in its products. PROTON’ssingle-minded approach to renew its product line-up to meet the evolving needs andrequirements of the buying public resulted in the roll-out of the Persona and subsequentlythe iconic Saga during the year under review. Having invested much time and effort in thethree years that are typically required to conceive and develop new models, PROTON isindeed pleased to note that the response to date from car owners has been extremelypositive, to say the least. The Persona is the first to embody PROTON’s philosophy of manufacturing „the rightcar for the right market at the right time for the right price‟. The Persona has received over50,000 in bookings as at end July 2008. The Persona was followed by the unveiling of thenew Saga, the car that remains the embodiment of Malaysia’s aspirations to be aninternationally competitive auto manufacturer. The experience and lessons PROTON has garnered over the years have beenembedded into this new model. This has translated into bookings of almost 70,000 unitswithin six months since its launch. It is currently the fastest-selling model in PROTON’shistory. Both the Persona and Saga are also expected to contribute significantly toPROTON’s export sales in the very near future. Within the PROTON Group, Lotus GroupInternational Limited (“Lotus”) has also unveiled a brand new thoroughbred that is set totake the world of performance cars by storm. The Lotus Evora is the first new Lotus modelto be launched in over 13 years. Entering the market above the Elise, Exige and Europa,
  20. 20. this new Lotus will be available in the first half of 2009 and is expected to contributepositively to the Lotus Group.TARGET MARKETS- Proton is the biggest Malaysian automobile manufacturer. Proton automobiles are available in many countries such as China, Singapore, Australia, Algeria and United Kingdom. Proton has commanded the local automotive market.- Malaysia’s Proton sets ambitious car export target.MARKETING STRATEGIES It is imperative that PROTON keeps its focus firmly on the road ahead. The Groupmust not only be flexible and adapt to the constantly changing environment, but must alsobe committed to carry out long-range initiatives aimed at further strengthening itsengineering and manufacturing foundations. With its expanded product range, improvedquality and value for money product positioning, the PROTON brand will becomeincreasingly attractive. This is what will drive sustainable growth for PROTON andpositive returns for its shareholders. Most certainly the road ahead will be paved withchallenges, but PROTON now has the benefit of experience and is rapidly strengtheningthe foundation for its future growth. However, PROTON cannot depend solely on the domestic market to grow. Asindicated in the previous years report, to prosper and thrive, PROTON has to expand itsexport potential further. Tangible and sustainable growth in the international market will be
  21. 21. the mainstay for PROTON as it aims to expand its market share and sales volume in theexport markets. Whilst PROTON has already gained a foothold in some markets, there is aneed to explore new emerging markets to tap into. In line with PROTONs 10-yearroadmap, the Group is committed towards expanding its regional presence in terms of salesand distribution, particularly in ASEAN, China, India, and the Middle East. Already, itsstrategies to grow the brand beyond Malaysian shores are beginning to show progress interms of sales growth. It must now also source components and identify manufacturingfacilities that will optimise costs and efficiency. The Chinese automotive market in particular, remains a very important market formany automotive manufacturers. PROTON, like other automotive manufacturers, regardsChina as an important market and one that it should participate in to be a competitiveautomotive player in the long run. In July 2007, PROTON entered into a businessarrangement with Jinhua Youngman Automobile Manufacturing Ltd (Jinhua Youngman) tosupply 30,000 units of Gen2 CBU cars over a period of 20 months. These cars will berebadged and sold in the Chinese automotive market under the Europestar brand. Althoughthe numbers are modest compared to other automotive manufacturers, this is a significantachievement for PROTON, representing the largest single export order of PROTON carssince its establishment in 1983. There is also large growth potential in this arrangementwith Jinhua Youngman, both in terms of CBU units to be exported, licensing of engine andplatform, as well as expanded scope of opportunities in engineering services and technicalassistance. For the Malaysian vendor community, this will also represent significant additionalvolume for their manufactured components.PROTON is also expanding itsnon-manufacturing business by optimising revenue that can be obtained from its Groupintellectual property. An example of this strategy can already be seen in the businessarrangement entered into between PROTON and Jinhua Youngman. This businessarrangement not only enables PROTON to indirectly enter the expanding Chineseautomotive market, but also enables its subsidiary, Lotus Group International Ltd, to gain a
  22. 22. strong foothold in the Chinese automotive engineering services market. PROTON is also mindful of the need to improve operational efficiency, particularlywith regard to improved capacity utilisation. Towards this end, PROTON has identifiedcontract manufacturing for other OEMs interested to enter this region as a possible meansto supplement its own manufacturing volumes.MARKETING MIXProduct Proton saga, iswara, wira, waja, perdana, gen 2, pesona, savvy. The importance of ensuring we have a strong product portfolio is all the more crucial asit has a pivotal impact on our turnaround plans. This is reinforced by our winning strategyof introducing „the right car, for the right market, at the right price and at the right time‟.This strategy was reflected in our newly introduced Persona and Saga models, with thelatter powered by the new CamPro IAFM engine during the year under review and sufficeto note, these two models are performing tremendously well in the market to date. Furthermore, we have continued to update and refresh our existing product lines toentice and attract customers. The re-energised Waja and Gen.2, with their new look andpowerful CamPro CPS engine, and the economical Savvy re-designed to give better valueproposition to the buyers of the Savvy Lite, have successfully managed to excite carconsumers in Malaysia during the year under review. Staying on course, PROTON will belaunching our first MPV in early 2009, further solidifying our product line-up to include ahigh quality multi-purpose vehicle that can cater to the family-oriented contemporarylifestyle. Other exciting offerings are also in the pipeline with replacements for the Waja andiconic Perdana on the drawing board. To sustain this positive momentum, we will continueour research and development (R&D) efforts and comprehensive market surveys to gain a
  23. 23. deeper understanding of the needs of our customer base. By harnessing the righttechnology and keeping our finger on the pulse of customers’ requirements, we trulybelieve that this will bring us closer to achieving our goals of a dynamic product portfolio.Product DevelopmentWith robust product planning, we were able to introduce both new and improved PROTONcars in the year under review, marked by the successful launch of the Persona in August2007, followed closely by the unveiling of the new Saga in January 2008.Product RefreshmentsGen.2 The face-lift of Gen.2 was done in tandem with the initiation of the Persona project totake advantage of cost sharing given that both projects share similarities in terms of theirinterior design. As a result of the exterior face-lift, the Gen.2 now features a new bumper,body kit, colour and alloy rims. We also upgraded parts of the exterior and interior of thecar based on customers’ feedback while introducing the much-anticipated CamPro CPSpowertrain. The engine’s Variable Intake Manifold (VIM) switch alternates between a longintake manifold at low engine speeds and a short intake manifold at higher engine speeds.PROTON is applying a longer intake manifold to achieve slower air flow, as this systemhas been found to promote better mixing of fuel. The short intake manifold will allow moreair to enter faster and be especially beneficial to engines at high Revolutions Per Minute(RPMs). With extra power, better handling and improved quality, the refreshed Gen.2 is setto become a highly competitive model in the sporty C-segment automotive category.PriceSATRIA 1.3GLi SE (Metallic) 42,888.12WIRA Peca 1.5GL (Metallic) 47,320.00WIRA 1.5GLi SE Aeroback Metallic) 50,027.97
  24. 24. WAJA 1.6L SOCH (Manual) 59,455.60GEN-2 1.6 DOCH Auto (Metallic) 58,114.50PERDANA V6 2.0(A) 106,096.94ISWARA Aeroback 1.3S-LMST (Metallic) 38,500.81 Interest Rate is 3.88% for 7 years and 3.99% for 9 years. 2 years standard manufacturing warranty plus 3 years Extended Warranty. Interest Rate is 3.88% for 7 years and 3.99% for 9 years.Promotion The year under review saw PROTON aggressively augmenting the International Sales& Services Division with additional human resources, focusing primarily on technicalsupport as well as after-sales and customer services. Clearly, this investment reflects theimportance of the export market in PROTON’s long-term growth. In terms of marketexpansion, the Group successfully penetrated into China and Thailand, while expandingour reach in Iran, the Middle East and Indonesia. At the same time, we re-energised the Saudi Arabian market, which is crucial to oursuccess in the Middle East. The year also saw the implementation of a special programmefor semi knocked-down (SKD) and completely knocked-down (CKD) exports to Iran andChina, which are expected to contribute positively towards thenew financial year’s exportvolume growth PROTON’s technical support and after-sales service capabilities must be ofhigh standards in order to further enhance PROTON’s brand equity in the internationalmarket. Towards this end, several ‘Service Campaigns’ were held during the year underreview in our key export markets. Also known as PROTON STAR, these campaignsincluded customer-focused initiatives ranging from a 43-point check to discounts for spareparts.
  25. 25. Naturally, these campaigns are ideal platforms to bring PROTON closer to theinternational customer base. During the year, there was also a marked increase in thefrequency of visits by both the sales and technical teams to the various countries in whichPROTON has presence, to enhance our understanding of the markets and provide betterresponse to the customers.PlaceIndonesiaPerformance and OperationsPT Proton Edar Indonesia registered higher sales of 1,422 units compared with 546 units inthe previous fiscal year. In July 2007, the company launched the Waja and Neo models inconjunction with the Indonesia International Motor Show 2007.ProspectsThe Indonesian Automotive Industry Association (Gaikindo) had forecasted a steady totalindustry volume growth over the next three years from 500,000 units in 2008 to 600,000 in2010. The Company is expected to perform better in the next financial year with thelaunching of the Gen.2 Persona in July 2008 and the new Saga before the end of 2008. Toachieve the anticipated sales increase and improve the after-sales support, the Company hasexpanded its network by an additional four branches and five dealers.ThailandPerformance and OperationsPROTON made its entry into Thailand on 30 January 2008 through its wholly-ownedsubsidiary, Proton Motors (Thailand) Limited. Within a short span of time, PROTONmanaged to successfully penetrate the Thai market with sales of its cars exceeding 1200units within the first six months of its launch. Since making in-roads into the Thai market,
  26. 26. PROTON captured 1.3% of the market share in the passenger car segment and was ranked8th overall.ProspectsFor financial year 2008/09, PROTON aims to achieve sales of 4000 units through the saleof various models including the Savvy, Gen.2, Neo and Persona.SingaporePerformance and Operations The Certificate of Entitlement quota for cars in Singapore was lower by 3.1% in 2007.This reduction signaled the end of bumper quotas in the island state and resulted indistributors reducing their margins to clear outstanding stock. The year also saw theintroduction of Chinamade cars into Singapore. Currently, 80% of cars in Singapore areless than four years old while 90% are less than five years. The reduction in quota, coupledwith the introduction of China-made cars led to a 43% reduction of brands operating in oursegment. Sales were also further affected by the increased petrol prices and tightening of creditdue to the sub-prime fall-out in the US, as banks were more cautious in lending money. Onanother note, the PROTON Persona launched in October 2007 received encouragingresponse and drew accolades from both thepress and customers.ProspectsGiven the market conditions in Singapore, a number of initiatives are inthe pipeline to increase our operational efficiency here.United KingdomOverview Contrary to concerns surrounding the automotive industry, the overall UK total
  27. 27. industry volume (TIV) in 2007 increased by approximately 2.5% to reflect over 2,400,000sales. The increase was due to the business and fleet sectors where sales rose by 5.5% and3.3% respectively, while private buyer sales were static, contributing only 43% of the totalmarket share. Sales of diesel cars continued to rise, capturing over 44% of market share byend-2007, and is forecasted to sustain its momentum. With regards to body types, the onlysignificant growth came from MPVs which rose by over 16%, usurping sales from themore traditional three, four and five-door segments. The year 2007 also saw the top ten market leaders focusing on private buyers with allof them seeing a substantial rise in sales, now accounting for over 70% of the entire UKvolume between them. One of the key topics that took centre-stage in 2007 was the ‘greenissue’ which influenced the perception of the UK buying public. Sales of ‘green’ cars werespearheaded by both the Government through vehicle taxation and manufacturers of highlyfuel-efficient and low CO2 emission vehicles marketing its benefits. Sales of low CO2 taxband vehicles rose by 15%, while high tax band CO2 vehicle salesdropped by 17%. Performance and Operations Overall, Proton Cars (UK) Ltd saw a reduction in sales by8% during the year under review. Nevertheless, despite reduced marketing expenditure,retail sales increased by 3.5% during the period, which bodes well for the brand in the longterm. Sales of the Gen.2 model improved during the year and the Satria, which waslaunched in March 2007, was well-received by dealers, motoring press and the generalpublic. However, sales for Waja were impacted due to a drop in demand throughout thesegment while the Savvy faced severe competition from other brands in its category.ProspectsIn the second half of 2007 and early 2008, the operating environment in the UK becamemore challenging with higher interest rates, a slow-down in the housing market and risingcost of living. Given these market conditions, Proton Cars (UK) is adopting a number ofinitiatives which will lower operating costs, while maintaining a high level of support forour dealer network and customers.
  28. 28. AustraliaOverviewThe total Australian vehicle sales grew by 9.1% and reached a record 1.049 million units.Sales of smaller fuel-efficient vehicles accounted for the majority of the increase due to theincreasing price of oil and rising interest rates. The small and light segments, whichPROTON competes in, grew by 10.2% and 5.9% respectively whilst PROTON’s retailsales increased by 16%. The current shift of sales towards smaller vehicles is expected tocontinue as fuel prices continue to rise and the economy slows down. Performance andOperations The positive financial results were due to improved Lotus vehicle sales andreduced operational costs by Proton Cars Australia. In addition, the company also managedto increase retail sales during the financial year in the face of heavy discounting by its maincompetitors.Prospects Automotive sales in the coming financial year are expected to ease slightly on the backof rising interest rates. On top of this, high fuel prices are projected to shift customers’preference to more fuel-efficient models which could translate to increased sales in thesmall and light vehicle segments. However, the launch of Persona in May 2008 and thesubsequent release of the face-lift Gen.2 are expected to boost volume by 22% in the newfinancial year. The number of dealers is also estimated to increase slightly. However, Proton CarsAustralia will be implementing an aggressive rationalisation programme to improve dealerthroughput and increase the yield in under-performing regions. The strong focus on thesetwo key areas is expected to result in increased revenue and better operational returns.Proton Cars Australia successfully increased its dealer network to 41 dealers nationallyduring this period. Currently, all main regions throughout Australia are covered. Sales ofthe Savvy and Jumbuck also improved significantly towards the end of the year underreview as a result of several innovative marketing campaigns. The Savvy in Australia.
  29. 29. CONTROLS/ACTION PLANImplementation StrategicImplementation PlanAuto-scrapping SchemeProton already has a scrapping scheme running since the year 2007 called Proton XChangewhere old cars over 10 years old and owned by the owner for at least 6 months, registeredand roadworthy can be traded in for RM 5,000 and so far up to 2,700 of such discountshave been issued. Once a car has been surrendered to Proton under the scheme it will bede-registered from the Road Transport Department and scrapped. Beside that, anyone whoscraps their cars which are older than 10 years will receive a RM5000 discount to buy anew car, but only a new Proton. There is also zero incentive for those looking at a newersecond hand car, even if it is a Perodua or Proton. The scheme will help proton to improvesales amid unfavorable consumer sentiment due to employment market uncertainties andcould help boost car sales and rejuvenate the local automotive industry.Quality Control CampaignQuality Control campaign would address employees, production practices and componentsmanufactured by it’s suppliers to make improvements to Proton quality. The launch of thequality campaign was based on the commitment of ensuring all Proton cars were free ofdefects. It wants to reverse this negative perception that Malaysians have on its cars, and isto get rid of the negative perception of brand image. It is going down to the core of theproblem and evaluating its product range and it’s suppliers to weed out the quality controlissues. Proton had always emphasized quality control in all aspects of its operations but itwas now drawing on lessons from the past to ensure current levels of quality control werestepped up. Proton had recently established a monitoring system to identify defects on theproduction line to respond faster to problems of defective components. Proton was looking
  30. 30. to further tap the markets in Asian, China, India and the Middle East. The high number ofbookings for the Persona and Saga to date is reflective of growing customer confidencewith regards to Protons new commitment to quality.Zero-Defect CampaignProton launched a zero-defect campaign aimed at erasing a reputation for poor quality thathas left it struggling to compete against foreign competitors. Proton also plans to fit allmodels with natural gas tanks from October to help motorists beat the rising cost of fuel.With the recent fuel hike, consumers want quality cars and they have high expectations.Proton wants to focus on rebuilding the company. The focus is putting Proton on a betterfooting, to improve quality, product and profit and need to be prepared to compete globally.The company will further tighten production controls and conduct audits before cars arerolled out to ensure that there are no rattles and squeaks any more.Protons maiden multi-purpose vehicle (MPV)Despite the economic slowdown, Protons maiden multi-purpose vehicle (MPV) slated tobe launched in April 2009 is expected to give a serious challenge to other comparableMPVs due to its competitive pricing and value for money. Proton Exora, to be powered bya 1,600cc engine, would be priced below RM80000. At this current price, proton believeExora will give a serious challenge to Toyata Avanza (maximum price: RM72000 for1,500cc) and the Nissan Grand Livina (maximum price: RM97000 for 1,800cc). Protonregistered a 4% decline in sales to 9874 units last month; Perodua posted a 5 % decline to9874 units, while Toyota recorded a more worrying contraction of 41% in January sales.On the other hand, Nissan sales in January 2009 came in strong with a 17% increase involume to 2,285 units while its total industry value has dipped by 5.0% compared to thesame month last year. Car manufacturers were keeping mum on their new launches perhapsdue to the fear of weak response as the economic outlook continued to look challenging.
  31. 31. Contingency PlanThe global and local automotive industries are facing one of the most challenging periodsin recent history with buyers being cautious amid the global economic crisis. Thegovernment today announced that it will assist in the auto-scrapping scheme for Proton andPerodua. The government’s plan, announced under the second economic stimulus packagetabled today, was timely and would positively impact the industry. Proton need every bit ofhelp from the Government during this difficult period to ensure its survival as close to200,000 people are directly and indirectly linked to the automotive industry nationwide.The scheme was also an important tool in the automotive industry’s environmentmanagement. It could help the industry to dispose old cars more efficiently and responsiblywhilst protecting the environment. Malaysia will follow the footsteps of other countries likeSpain, France and Italy. The UK (is also) contemplating the implementation of such ascheme in the near future to spur car sales. Once surrendered, the car cannot be returned.
  33. 33. Chapter 2- strategy marketing Carl McDaniel, ChAerles W.Lamb and F.Hair, Jr.(2008).introduction to Marketing (9th edition).Thomos South-WesternFinancial Statement 2008 annual report of Proton car models.’s Proton back in profit on higher sales’s Proton sets ambitious car export target plan From Wikipedia, the free encyclopedia of Proton and Lotus Top the Aussie Vehicle Sales Growth Charts Edar Holding
  34. 34. mpany%20Name/Counter%20Name%20M%20-%20Z/Proton%2020041006.pdf