When you're No. 2 in the market and trailing behind by a fair margin, you can become No. 1 by being better at the game or you can change the rules of the game. In the case of the proposed Perodua-Proton merger, it would appear that Proton seeks to change the rules of the game instead of being better at selling cars.
Why in heaven's name would Perodua want to merge with Proton, when Perodua is doing quite well without Proton's help? Well, according to proponents of the merger, there would be economies of scale to be gained. Also, Perodua's plant is maxed out and can't produce cars fast enough for the domestic market, whereas Proton has a lot of extra capacity at its Shah Alam and Tanjung Malim plants.
While the argument of economies of scale looks good at face value, the fact of the matter is, economies of scale can only be reaped if both Perodua and Proton cars share a lot of common parts, which they don't. Unlike European marquees that have taken the modular approach to producing new cars, Perodua and Proton cars are built on almost entirely different platforms.
As for taking advantage of Proton's extra capacity, well, that does not require a merger to happen. Proton can simply rent out its spare production capacity without merging with Perodua, something that's been done by other car assembly plants in Malaysia since the 1980s.
One example was the Volvo plant that produced the Volvo 244, which also produced Alfa Romeos back in 1982.
And the fact that neither Perodua nor Proton cars are doing well in the export market will not be helped by a merger of the two. Neither manufacturers are able to produce cars that are good enough to trump the competition in the open overseas market and should really focus on producing cars that overseas buyers want instead of trying to make life more difficult for each other.
The truth of the matter is, mergers between two companies often result in the destruction of one company at the benefit of another. Both companies would come with different systems and cultures, and the quickest, most efficient way to get the newly merged entity going is by subsuming one company under another.
Would Proton be willing to let Perodua's management team take over the newly merged company, imposing Perodua's sytems and culture onto Proton's people? You can bet that Perodua is not going to let the reverse happen without a big fight, considering that its systems and culture are the things that make Perodua the success it is today.
So, it's not just incompatibility at the production material level that's a big obstacle to the merger. Incompatible or rather competing cultures and systems also form large obstacles to the proposed merger.
As a consumer, I'd be willing to see a merger, provided that Perodua comes out on top. If Proton takes over Perodua, then I'd really be worried about buying Perodua cars. I'd have to expect Proton quality instead of the current Perodua quality.
Yes, I can talk, because I've owned both makes and so have my extended family members. In my humble opinion, Perodua tends to make better cars. And looking at the domestic car market in which Perodua is at the No. 1 position, more consumers appear to agree with me than those that don't.
Then again, I really hope the merger does not go through at all because competition is good for Malaysia's domestic market. With so much protectionism, competition ensures that both Perodua and Proton stay on their toes to produce quality cars. Remove that competition and Proton would be even more complacent about not having to compete in an open market. And the same can happen to Perodua, in that remove Proton from the equation and Perodua might just become complacent enough to start producing low quality cars.
So, let things be the way they are for now. Let Proton struggle with its overcapacity. It'll teach it to work hard at enhancing its product line, such that it does regain market share through tenacity and innovation, and not backroom deals.
Why in heaven's name would Perodua want to merge with Proton, when Perodua is doing quite well without Proton's help? Well, according to proponents of the merger, there would be economies of scale to be gained. Also, Perodua's plant is maxed out and can't produce cars fast enough for the domestic market, whereas Proton has a lot of extra capacity at its Shah Alam and Tanjung Malim plants.
While the argument of economies of scale looks good at face value, the fact of the matter is, economies of scale can only be reaped if both Perodua and Proton cars share a lot of common parts, which they don't. Unlike European marquees that have taken the modular approach to producing new cars, Perodua and Proton cars are built on almost entirely different platforms.
As for taking advantage of Proton's extra capacity, well, that does not require a merger to happen. Proton can simply rent out its spare production capacity without merging with Perodua, something that's been done by other car assembly plants in Malaysia since the 1980s.
One example was the Volvo plant that produced the Volvo 244, which also produced Alfa Romeos back in 1982.
And the fact that neither Perodua nor Proton cars are doing well in the export market will not be helped by a merger of the two. Neither manufacturers are able to produce cars that are good enough to trump the competition in the open overseas market and should really focus on producing cars that overseas buyers want instead of trying to make life more difficult for each other.
The truth of the matter is, mergers between two companies often result in the destruction of one company at the benefit of another. Both companies would come with different systems and cultures, and the quickest, most efficient way to get the newly merged entity going is by subsuming one company under another.
Would Proton be willing to let Perodua's management team take over the newly merged company, imposing Perodua's sytems and culture onto Proton's people? You can bet that Perodua is not going to let the reverse happen without a big fight, considering that its systems and culture are the things that make Perodua the success it is today.
So, it's not just incompatibility at the production material level that's a big obstacle to the merger. Incompatible or rather competing cultures and systems also form large obstacles to the proposed merger.
As a consumer, I'd be willing to see a merger, provided that Perodua comes out on top. If Proton takes over Perodua, then I'd really be worried about buying Perodua cars. I'd have to expect Proton quality instead of the current Perodua quality.
Yes, I can talk, because I've owned both makes and so have my extended family members. In my humble opinion, Perodua tends to make better cars. And looking at the domestic car market in which Perodua is at the No. 1 position, more consumers appear to agree with me than those that don't.
Then again, I really hope the merger does not go through at all because competition is good for Malaysia's domestic market. With so much protectionism, competition ensures that both Perodua and Proton stay on their toes to produce quality cars. Remove that competition and Proton would be even more complacent about not having to compete in an open market. And the same can happen to Perodua, in that remove Proton from the equation and Perodua might just become complacent enough to start producing low quality cars.
So, let things be the way they are for now. Let Proton struggle with its overcapacity. It'll teach it to work hard at enhancing its product line, such that it does regain market share through tenacity and innovation, and not backroom deals.
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