Proton Holdings Berhad (Proton) operates under a unique ownership and management structure. DRB-HICOM, a Malaysian conglomerate, holds a majority stake (50.1%) in Proton, ensuring its status as a national car brand and maintaining control over major decisions. Geely, a Chinese automotive giant, owns the remaining 49.9% stake. This partnership has been instrumental in Proton’s recent turnaround. Geely brings its technological expertise and global market access to the table, while DRB-HICOM provides local market understanding and ensures Proton retains its national identity. This collaboration has fueled Proton’s ambitious 10-year plan, which includes a target of 400,000 units by 2027 and a vested mission to become a top-three car manufacturer in ASEAN.

This chapter explores the industry trends that inform Proton’s strategic priorities, along with challenges on the horizon for the company.

Strong demand and governmental push for Electric Vehicles (EVs)

• The Malaysian government’s industrial agenda is spelled out in the New Industrial Master Plan 2030 that includes EVs as a priority. By 2030, electrified vehicles will account for 15% of Malaysia’s total sales volume, and the country aims for exports as well.
• EVs are, by and large, still bought by the top-20 income group in the country due to affordability issues, arising from the current taxation structure and limitations put in place to protect the local automotive supply chain. However, the EV industry is expected to expand this year, even as it is still growing from a small base.
• The local EV sales volume has increased from just 3,079 units in 2022 to 11,624 units in 2023, and the market share has increased to 1.45% from 0.43%.

Challenges to growing the EV sector

Affordability:

• Under the Ministry of Investment, Trade and Industry (MITI), imported EVs into Malaysia must not be priced under RM100,000.
• This policy is seen as a barrier to enabling the mass market to switch to EVs, but is also a bid to protect the local automotive industry and to encourage the local production of EVs under RM100,000.

Availability of Charging Infrastructure:

• Malaysia aims to have 10,000 EV charge points by 2025 but development appears to be far behind with approximately 1,500 charge points deployed so far.
• While Charge Point Operators have accelerated the deployment of chargers along highways and destinations, bureaucratic hurdles are slowing down the availability of new chargers. Several EV chargers have been deployed but many of which are not yet live.
• The Energy Commission (ST) said the approval of the EVCS licence now takes just one month and the delay in approvals is due to incomplete applications.
• As of mid-December 2023, only 223 EVCS licences have been granted.

Against this backdrop, Geely has set its eyes on creating a foothold in Southeast Asia’s EV market through Proton.

• Proton’s new Automotive Hi-Tech Valley (AHTV) project:
  • DRB Hi-Com’s Proton has received a whopping $10 billion investment from Geely, inking a joint venture to manage and operate the development and construction of the AHTV project in Tanjung Malim, Perak.
  • This includes the development of an integrated automotive city that will serve as a hub for the New Energy Vehicle (NEV) industry.
  • AHTV is expected to attract some RM32 billion worth of investments, including for Proton to fully relocate its manufacturing facilities to Tanjung Malim by 2026.
  • The hub will be home to facilities for research and development as well, with plans to include a research-based university and an R&D centre for carmakers to test their vehicles with a tropicalised setting.
  • Chinese and Malaysian suppliers will be encouraged to set up shop in the area under the vision of creating one of the leading auto industry centers in Southeast Asia.

• Fast-tracking the rollout of affordable EVs:
  • During the launch of the Proton X90 in May 2023, Geely’s Founder and Chairman Eric Li Shufu said the Chinese automaker wants to empower Proton in the NEV transformation with the goal of launching at least one NEV model every year.
  • In November 2023, the Ministry of Investment, Trade and Industry (MITI) had called upon local carmakers (namely Proton and Perodua) to introduce affordable EVs by 2025. Following this push, Proton announced its’ plans to reveal its’ first EV model “very soon” (likely within 2024), with a second model to be introduced 6 – 8 months later.

A Growing Ambition and Need to Expand into ASEAN

• At 33 million people, Malaysia is a relatively small market, so growth of the national auto industry will require overseas expansion or in increasing the nation’s appeal as a manufacturing hub.
• Proton and Perodua control a combined domestic market share of roughly 60%. But Proton only exported approximately 4% of the 141,432 vehicles sold last year.
• According to Thai Prime Minister Srettha Thavisin in October 2023, Proton is considering building an assembly plant in Thailand. It appears that Proton is looking to make use of the supply chain in Thailand, Southeast Asia’s largest producer of automobiles, while developing Malaysia’s EV industry.

Addressing Challenges in the ASEAN Automotive Landscape

Stiff Regional Competition:

• For manufacturing, Indonesia looks to be the regions strongest contender, leveraging on its’ abundance of nickel which is a crucial material for EV batteries. The nation’s reserve is said to be the world’s largest, which puts Indonesia as an attractive location for global automakers. Last year, the joint venture SAIC-GM-Wuling Automobile started making EVs in Indonesia, as did South Korean rival Hyundai Motor.
• Thailand is not sitting idly by, having set a goal of EVs accounting for 30% or more of new cars produced in the country by 2030. It launched new incentives in February 2022, the most important of which is an up to 150,000 baht ($4,300) subsidy for EVs from manufacturers that plan to produce vehicles in Thailand.
• BYD started building an EV assembly plant in Thailand that is due to begin operations next year.
• The SAIC Motor group and Great Wall Motor are bolstering sales and manufacturing in Thailand as well.

Supply Chain Challenges:

• Global microchip shortage: In April 2022, Proton sales declined 32.2% to 8,839 units, mainly due to chip shortage. The shortage was driven by a sudden surge in bookings, coupled with a cost increase for components due to the weakening of the ringgit.
• Climate-related disruptions: In January 2022, sales volume fell to 4,453 units (for both domestic and export sales) in January, a reduction of 25.3% from the same month in 2021 and equivalent to an estimated local market share of 11.3%. This was a result of the severe Selangor flood at the end of 2021, affecting several of the automakers’ vendors which disrupted its component supply and production schedules.