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?