Saturday 11 January 2014

A tale of two diverging carmakers

The Edge, Jan 6, 2014 issue
By Kamarul Azhar 

South Korea’s Hyundai Motor was established in 1967 and has a 16-year head start on Malaysia’s national car company, Proton Holdings Bhd, which was set up in 1983, two years after Tun Dr Mahathir Mohamad became prime minister.

Proton, which started with Japanese partner Mitsubishi Corp, was to be the centrepiece of Dr Mahathir’s ambition to make Malaysia an Asian industrial powerhouse.

While the 16 years’ advantage is big, the reality is the gap in the performance of Hyundai and Proton is far bigger than the difference in their age.  Hyundai is now enjoying immense success and is a global car company with annual sales of 4.4 million cars. Together with its 32.8%-owned associate KIA Motors, Hyundai Motor Group is the fourth largest carmaker in the world, with 7.12 million cars sold last year, after Toyota, General Motors and Volkswagen.

Proton, meanwhile, continues to languish even in its protected home market and has hardly any export market to talk of. In Malaysia, it is now the No. 2 carmaker with 141,121 units sold in 2012, behind Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

Why is it that South Korea could create world champions in the automotive industry? Today, Hyundai and KIA cars can be seen on the roads from Panama City to Manila, not to mention major markets like the US, Europe and China.  

The picture for Proton is totally different. Despite all the protective measures put in by the government, it has not made any impact outside of Malaysia. When Hyundai launched its first model in 1967, it was a rebadged Ford Motor Company’s Cortina. Proton did the same, with its maiden model launched in 1985 — the Saga, a rebadged Mitsubishi Lancer Fiora. After almost a decade of rebadging Ford’s models, Hyundai graduated as a fully fledged carmaker when it introduced its first home-grown model, the Pony, in 1975. Soon enough, the car was exported to Ecuador, the Benelux countries and Canada.  In 1986, Hyundai exported its cars to the US, then the largest car market in the world. While Hyundai cars used to be dismissed as unreliable, the company persevered and continued building its brand image by investing in design and build-quality as well as undertaking long-term research of its cars.

The rest, as they say, is history, with its current flagship model, the Sonata, competing at the same level with the likes of Toyota Camry and Honda Accord.

Proton, meanwhile, only managed to launch its own model, the Gen-2, in 2004, to mixed reviews. With mounting challenge in the domestic market, notably from Perodua, it continues to struggle with lack of economies of scale and the heavy burden of having to invest in developing new technologies and models.  

Proton has not utilised the protection and privileges it enjoyed over the past 30 years to become a globally competitive car company that is able to stand on its own. Instead, it is still dependent on some form of protection.  And it continues to enjoy a research and development grant amounting to close to RM200 million a year from the government, even though Proton is now privately owned by Tan Sri Syed Mokhtar Albukhary, who bought Khazanah Nasional’s stake in the company several years ago.

Indeed, now that it is in private hands, should we still give it national car status and the privileges that come with it?


  1. Thank you for the information that being short and easy to understand especially on the FDI where it clearly shows FDI into Malaysia is really low compares to the others.

  2. Even we won't fault the government for trying a new car brand, for the initial years, but it would be very unwise to continue supporting it, furthermore, the company is no longer belong to the government. What is happening to our government? I can understand, a lot of young entrepreneur could try in a new business for whatsoever reason, if it doesn't do well, he have to close down his business due to lack of businesses. Why are the entire population of Malaysia being burden for this mistakes, not to mentioned the recent hike in most prices from fuel, food, to house assessments and electricity. And, I can hardly understand BN government support such thing? In the long run, the citizen at large will have to suffer for this little Napoleons. Sad but is a fact.

  3. Other than Proton being crap, there is another factor - there is no successful car maker from a country with less than 50m population. Korea has 50m. Further, making good car profitably s not easy, all UK car makers failed.

    1. In that case, shouldn't the country stop supporting and bailing out Proton and allocate the funds to better use where Malaysia has a niche. Every country should find their niche. Malaysia already lost out to Thailand in the automobile sector.

  4. Syed Mokhtar has no choice but bought into Proton stake so long he wants to continue to be in GLCs and gain support from the govt. 30 yrs ago when Proton was launched, I already fore-see the failure as the country has a comparatively small population, and the major players in the company aren't very innovative nor diligent. VW, Ford and other makes won't be interested to invest further. Japanese companies are too realistic and they have learned their lessons dealing with govt. Sooner or later Proton will definitely close shop say what you may. The govt. had mentioned that it would affect 50,000 people's livelihood in order to garner support. Patriotism itself alone can't save Proton industry. Any solution in sight? no....just wait to close shop.

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