PSA Group Looks to Expand Southeast Asian Presence with Proton Bid

Proton grille logo

For a short span in the 90s, Malaysian car brand Proton was available in the Philippines. However, the venture never really took off, mainly because car buyers that time were less accommodating to new, unknown brands, and partly because the Proton cars themselves had quality issues with poor aftersales support. A lot has changed since then, and today’s Proton cars are vastly improved.

Proton/Peugeot logos ©thestar.com.my

With the Proton stigma all but forgotten, and more people beginning to patronize lesser known car brands, perhaps Proton should make its reintroduction in the country. And there’s a good chance this may happen as French car manufacturer PSA Group submitted a bid for partnership with Proton Holdings.

With the bid, the PSA Group—owner of the Peugeot, Citroen, and DS marques—pits itself in a bidding war with Zhejiang Geely Holding Group of China, which also made an offer for the Malaysian owner of UK’s Lotus Cars.

"PSA Group made an offer and is willing to go further," a PSA spokesman said. "We have no additional comment at this stage."

All set to become Europe’s second biggest

PSA’s Proton offer comes at the heels of its pursuit to acquire General Motors’ Opel and Vauxhall brands, which would position it to become Europe’s second biggest carmaker after Volkswagen. Currently, the PSA Group ranks third in Europe behind VW Group and Renault Group. In addition to growing the brand, a Proton partnership gives PSA a way to penetrate the elusive Southeast Asian market in a big way.

"PSA has been looking for a way into the South Asian, or ASEAN, market for a few years now, and it's become a key pillar of its strategy," said Ian Fletcher, an analyst at IHS Markit. According to a report in the French business newspaper Les Echoes, PSA developed a five-year ‘Push to Pass’ plan with the goal to sell one million vehicles in China and Southeast Asia by 2021.

Better footing

Proton Tanjung Malim plant ©jtr.my

Fletcher said that Proton has two underutilized production facilities that PSA can use as a production and export base for Southeast Asia and other emerging markets, the most notable of which is the relatively new manufacturing plant in Tanjung Malim. Reuters reported that Proton sold 102,000 cars in 2015, a large number to say the least, but the quantity becomes less impressive considering that Proton’s manufacturing facilities can shell out 400,000 annually.

The French company plans to use Proton’s facilities as a manufacturing port for its low-cost models. Winning a stake or even a controlling interest in Proton could also allow PSA to make use of free-trade agreements in the region to penetrate other lucrative markets such as Indonesia, Thailand, and the Philippines. It would also broaden PSA’s footing and help hedge against economic events in Europe, as it hopes to become even more Euro-centric with the potential Opel/Vauxhall buyout.

"We're only less than five years since the last time the market tumbled in Europe. A lot of companies are trying to balance themselves globally, and PSA needs to focus on markets outside of Europe more than it's doing at the moment," Fletcher said.

Other interested parties

Aside from Zhejiang Geely, the other interested parties in a Proton share are Renault and Suzuki. Recent reports however, reveal that Renault ceased to purse the deal.

Proton sought foreign partnership after it received financial aid from the Malaysian government amounting to 1.5 billion ringgit ($365 million). The company said in a statement that it will decide on a partner within the first half of this year.

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