Automobile Case - Proton and Perodua

Proton and Perodua already control 70% of the country’s passenger car market, there is ample room to “co-exist separately”. The vendors to both those companies have benefited from a vast localization policy instituted in the past. Perodua makes the cylinder heads for Proton’s Campro engines and further cooperation and joint ventures in parts and components are being considered.

“Both companies can survive and we both give vendors access to different markets,’’ he says, reiterating his preference for retaining the status quo

- cost cutting being pitched by global car companies will better serve them to tap the advantages when the economy recovers. But if Proton does not change amidst these global shift, it would jeopardise its future competitiveness.

For example, the current structure of manufacturers and vendors in Malaysia is widely perceived to be inherently flawed. Manufacturers and vendors are located throughout the peninsula and the fragmented nature of the business in Malaysia when compared to the more cohesive cluster concept practised in Thailand only adds to cost and inefficiencies. Especially during bad times, these weaknesses can be daunting.

The scattered centres of production around the country is also not a help to suppliers, who have to incur added cost in shipping parts and components from their factories to all those centres in the country. “If they do not want to do that, then they would have to invest in new factories. And this is stretching the eco-system,”

- Needless to say, suppliers and vendors will be more exposed to financial failure if the returns on investment on a new factory is way below expectations.

And that is compounded by the situation where components have to be shipped from one place to another to build a module for a car.

The situation is different in Thailand where car companies are located in Rayong and not scattered throughout