Canadian Manufacturing

China’s auto giant Geely to buy half of Malaysia’s Proton, nabs Lotus in the process

Geely bought Volvo from Ford Motor Co. in 2010 and is counting on the Proton tie-up for a boost in Southeast Asia, known as a "very difficult market" dominated by Japanese brands


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KUALA LUMPUR, Malaysia—The Chinese owner of Sweden’s Volvo Cars agreed Wednesday to buy 49.9 per cent of Malaysian automaker Proton, expanding its presence in Southeast Asia.

As part of the deal, Geely Automobile Holdings Ltd. will acquire Proton’s stake in British automaker Lotus.

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

Proton Holdings Bhd. was founded in 1983 by the Malaysian government to create a domestic auto brand. It bought Lotus in 1996. The company was privatized in 2012 and has struggled since then, seeing its market share dwindle to 12 per cent last year.

Proton’s owner, DRB-Hicom, released no financial details. It said a final agreement would be signed in July.

Geely is one of China’s biggest independent auto brands. Founded in 1986 as a refrigerator manufacturer, it started producing motorcycles in the 1990s and launched its first car in 2002.

Geely bought Volvo from Ford Motor Co. in 2010. Last year, it launched a new brand, Lynk & Co., to be positioned in the mid-market between Geely’s lower-priced vehicles and Volvo.

Last year’s sales of Geely’s own brands rose 50 per cent over 2015 to 765,851 vehicles, the company says.

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

“If you look at U.S. 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 Malaysia’s second finance minister, Johari Abdul Ghani, who attended the signing ceremony.

Johari said Proton will remain Malaysia’s national car, with DRB-Hicom keeping a 50.1 per cent controlling stake.

Neither company gave details of their commercial plans.

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.”


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