Record profits for China's Geely spur optimism for Malaysia's Proton

Geely saw its first half 2017 net profit jump 128 per cent to 4.34 billion yuan (S$887 million).
Geely saw its first half 2017 net profit jump 128 per cent to 4.34 billion yuan (S$887 million). PHOTO: REUTERS

PETALING JAYA (THE STAR/ASIA NEWS NETWORK) - Record profits by China's Geely Automobile Holdings has spurred optimism for Malaysian carmaker Proton, which is in need of a revival.

Geely saw its first half 2017 net profit jump 128 per cent to 4.34 billion yuan (S$887 million). With sales jumping 89 per cent in the first six months of this year, the company has raised its 2017 sales target by 10 per cent to 1.1 million vehicles.

It sold 766,000 vehicles last year.

Vehicles engineered with Volvo technology, such as its GC9 sedan and the Boyue sport-utility vehicle (SUV), have been a hit in China, the world's biggest auto market.

Following the 49 per cent stake-acquisition of Proton from parent DRB-Hicom earlier this year by Geely's parent, Zhejiang Geely Holding Group, the Boyue is expected to arrive in Malaysia in the second half of 2018.

One industry observer said the Boyue would be a popular model in Malaysia and would rival the likes of the Honda CR-V and Mazda CX-5.

"The Boyue will definitely have a market here. Its high specs, premium features and reasonable pricing would appeal to the Malaysian buyer," he said.

The Boyue is priced from 98,800 yuan (S$20,191) to 157,800 yuan (S$32,248). Both the Honda CR-V and Mazda CX-5 are priced over RM100,000 (S$31,748).

Another industry observer said Geely's success can be attributed to its technology know-how. "Unlike many carmakers that rely on original equipment manufacturers to supply technology, Geely bought into their own technology."

In 2009, Geely bought Australian transmission maker DSI (Drivetrain Systems International) for A$47.4 million. It acquired Volvo Cars from Ford Motor in a US$1.5 billion deal in August 2010.

"The acquisition of Volvo has allowed Geely to make leaps and bounds in terms of technology know-how...technology that Proton lacks," said the industry observer.

The big question is how the collaboration between Proton and Geely will work.

"No doubt that Geely has the technology and business know-how, as well as the manufacturing processes to help Proton. But how will the collaboration work, given the different corporate culture?" asked one industry expert.

He pointed out also that Geely did not have a majority stake in Proton, adding that there is also the perception that China-manufactured vehicles were inferior to Korean and Japanese models.

"Even though the Boyue is already a success, there is the need to convince the local market that it is a value-for-money product."

Since the collaboration was announced, there has yet to be any announcement on how the Boyue would be marketed in Malaysia.

"Will the Malaysia model be a simple rebadge of the original? No one knows," said an analyst. "From a simple standpoint, it would be simple to just rebadge and get the model out as soon as possible, instead of wasting time and resources," he said.