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May 25, 2017

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Geely buys 49.9% of Malaysia’s Proton to grow in Southeast Asia

ZHEJIANG Geely Holding Group, the Chinese owner of Sweden’s Volvo Cars, has agreed to buy 49.9 percent of Malaysian automaker Proton, gaining a platform to expand into Southeast Asia.

The deal gives Geely a distribution network in Southeast Asia, where non-Japanese brands have struggled. Proton gets a financially strong partner and possibly more advanced technology.

The financial terms of the Proton deal were not disclosed at a joint news conference in Kuala Lumpur yesterday.

As part of the deal, Geely will also buy 51 percent of UK carmaker Lotus from Proton for 51 million pounds (US$66.2 million).

Proton is selling its stake in Lotus to cut losses. The remaining 49 percent is being purchased by Etika Automobile, which is owned by Syed Mokhtar Al-Bukhary, the tycoon who holds the controlling stake in Proton’s parent company DRB-HICOM.

Geely said the agreement laid the foundation for a wider framework for Geely, Proton and Lotus to explore joint synergies in research and development, manufacturing and market presence.

“With Proton and Lotus joining the Geely Group portfolio of brands, we will strengthen our global footprint and develop a beachhead in Southeast Asia,” a region of over 650 million people, said Li Donghui, executive vice president and chief financial officer of Geely.

DRB-HICOM’s controlling 50.1 percent stake means Proton will remain a Malaysian national brand, officials said.

Geely and DRB-HICOM expect to sign a final deal in July.

The Proton tie-up gives Geely a boost in Southeast Asia, a “very difficult market” dominated by Japanese brands, said Yale Zhang, managing director of Automotive Foresight, a research firm in Shanghai.

“If you look at US or European automakers who started from scratch there, basically none of them succeeded,” said Zhang. “If you want to enter and you have a well-established brand like Proton, then you get access to a relatively popular brand and also a ready distribution channel.”

The deal will give Proton “a real chance of making a comeback, a huge one I hope,” said Johari Abdul Ghani, Malaysia’s second finance minister who was at the signing ceremony.

Zhang suggested a possible strategy might be to manufacture Geely’s latest models under the Proton name.

“The current Geely models are much better than the current Proton models,” said Zhang. “The Protons are basically some old Mitsubishi products, very old.”

Proton Holdings Bhd was founded in 1983 by the Malaysian government to create a domestic auto brand. It bought Lotus in 1996. But sales have suffered due to growing competition and a reputation for poor quality and bland models. The company was privatized in 2012 and continued to struggle.

Data from the Malaysian Automotive Association showed Proton produced some 100,000 units of cars in 2016 but only sold some 72,000 units, with a market share of 14 percent, behind domestic car brand Perodua and is on the edge of falling behind Honda.

Geely rose to stardom in 2010 when it bought Volvo Cars from Ford. Geely also owns the London Taxi Co, acquired in 2013.

Last year, it launched Lynk & Co brand to be set in the mid-market between Geely’s lower-priced vehicles and Volvo.


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