GM Pulls Out from JV with DRB-Hicom

DRB-HICOM Bhd and General Motors Corp (GM) have mutually agreed to part company. Starting 1 January 2010, DRB-HICOM would no longer import GM cars into Malaysia, albeit Chevrolets would continue to be imported and sold.

I can't help but think that this has something to do with the lack of a level playing field in Malaysia's automotive sector. With so much done to protect a company like Proton from foreign competitors, other industry players have to struggle with slim margins and low volume sales.

As it is, GM is facing financial difficulties at home (back in the US). This makes it all the more difficult for it to continue being a big player in the Malaysian market.

What a lost opportunity this is. GM had expressed interest in setting up a manufacturing base in Malaysia, much like it has in Thailand. Clearly, this is not going to happen any time soon; not while a company like Proton continues to rely on market protectionism at the expense of foreign direct investment.

How can we expect foreign investors to come to Malaysia to set up an automotive manufacturing base if we continue to molly coddle Proton? Malaysia has already lost two decades of auto-manufacturing lead to neighbouring countries. Another lost decade may reduce Malaysia to a state of insignificance as far as major players in the automotive industry are concerned.

The writing is on the wall for Malaysia's automotive sector. Its contribution to government revenue continues to pale in significance compared to other sectors.

How much longer should this be ignored?

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Addendum: Reportedly, car sales in Malaysia number around 500,000 units a year. Under GM's partnership with DRB-HICOM, Chevrolet sales would be more than 3,000 units in a good year. Sales have since fallen to fewer than 1,000 units.

Why is this not surprising, especially when Proton continues to have preferential treatment? Not only is this a turn off for foreign investors, Malaysian consumers also suffer from artificially inflated car prices.

It is rumoured that Naza is now interested to step in where DRB-HICOM left off. Well, good luck with that.

See http://www.btimes.com.my/articles/gmos-2/Article/

My Beef with Proton - Over Reliance on Market Protection

I have vivid memories of my Proton Waja 1.6L(M). It was filled with all sorts of defects, which I had to address over a two year period.

At the same time, it was the first ever mid-range car I ever owned. And I put in time, effort and loads of money to do it up, so that it could more than keep up with more powerful cars as well as look stylish while doing it.

Would I go out to buy another Proton now that I'm able to afford far more expensive cars? After careful consideration, the answer to that is "not likely".

There are several "national car" companies to choose from. While Proton may offer relatively cheaper options, I'm pretty annoyed by the fact that it's Proton's inability to fully compete in an open market that's causing car prices in Malaysia to be inflated artificially.

Just to spite this complacent company, I would opt for other local makes like Perodua, Naza and even Innokom, because I can. Proton has become too comfortable with over two decades of protection and is, thus, rightfully branded complacent, and deserves to be shunned.

While the protection Proton enjoys also benefits other local marquees, it does not change the fact that domestic car prices are artificially inflated mainly because of Proton's inability to compete in an open market more than anyone else.

Thus, market protection should be removed.

Perodua has Toyota's backing. Remove the local market protection and it could simply adapt by selling more re-badged Toyota's instead of just a handful of models.

Naza has Kia and Peugeot backing. Remove local market protection and it could simply adapt by selling more re-badged Kias and Peugeots.

Inokom has Hyundai backing. Remove local market protection... well, you get the idea.

As for Proton, remove local market protection and it'll sell more Proton cars? Not likely or at least not without a strong partner to back it.

For market protection removal to work in Proton's favour, it needs a strong partner like VW or whoever else that's in the market to buy into Proton. The objective is so that Proton becomes lean and far more competitive.

Yes, there will be changes, which could also include a management buy-out. In the end, the government and the rakyat stand to gain from higher revenue and profits from the sale of Protons and other locally assembled cars, both domestic and overseas.

Foreign direct investment would also increase because of the new breath of life given to the Malaysian automotive industry.

Also, Proton prices would be comparable to those sold more cheaply overseas currently, that is relative to the cost of living.

So, will I buy another Proton? Until there is significant reform of the local automotive industry, the answer to that is again "not likely".

At the very least, I'd feel satisfied that I'm doing my part to press for change.