Malaysia Car Industry Research Paper 10

1.0 MALAYSIA CAR INDUSTRY

1.1 Background

Malaysia is one of the smaller Southeasterly Asiatic markets for motor vehicle production and gross revenues and ranks behind South Korea, the People ’ s Republic of China, Taiwan, Thailand and Indonesia. Since 1985, when the first made-in-Malaysia auto, Proton rolled off the production line, it have been spearheading Malaysia ’ s ambitious program to go one of the universe ’ s most advanced industrial societies by the twelvemonth 2020. To day of the month over one million Protons have been sold in 51 states throughout the universe.

By contrast, Malaysia ’ s motor vehicle industry really remains to a great extent protected with import responsibilities runing from 140 to 300 per centum on autos, and really high local content demands. Malaysia besides maintains an import prohibition on motor vehicles from Israel and South Africa. These protectionism clause in big has made Proton to became the figure one best merchandising rider auto in Malaysia. It has besides maintained a immense market portion of over 50 % since 1987 from it infancy beginnings in 1985.

1.2 Market Review

Year 1998 Position Makes Gross saless Unit Share

1.  Proton ( EON ) 67595 49.5 %
2.  Kancil 38921 28.5 %
3.  Proton ( USPD ) 19894 14.6 %
4.  Honda 4100 3.0 %
5.  Toyota 1930 1.4 %
6.  Nissan 1407 1.0 %
7.  Mercedes Benz 1160 0.9 %
8.  BMW 672 0.5 %
9.  Volvo 422 0.3 %
10.   Peugeot 350 0.3 %

Entire Passenger Car 136451 100 %

1.3 The Proton Story

In 1983, the Malayan authorities formed Proton ( Perusahaan Otomobil Nasional ) – a 70/30 joint venture between the Malayan authorities and Mitsubishi. Assembly of its first national auto, the Proton SAGA, began in 1985. The SAGA contained 70 per centum local content in the beginning, with programs to increase this finally to 90-95 per centum. Presently the Proton is between 60 and 62 per centum local content harmonizing to GSP standards.

Product Launch

• 1985 Proton SAGA 1.3 and 1.5 liter
• 1992 Proton ISWARA 1.3 and 1.5 liter
• 1993 Proton WIRA 1.5 and 1.6 liter
• 1994 Proton SATRIA 1.3 and 1.6 liter
• 1995 Proton PERDANA 2.0 liter
• Proton WIRA 1.3, 1.8 liter and
• 2.0 Diesel ( new coevals )
• 1996 Proton TIARA 1.1 liter
• 1997 Proton PUTRA 1.8 DOHC
• 1998 Proton SATRIA GTi 16V
• Proton PERDANA V6

1.4 EON ( Proton Leading Car Distributor )

EON, a member of the DRB-Hicom Group, was established on 16 May 1984 as the exclusive distributer of

Proton autos. On 1 September 1985, it marketed the first Proton Saga, and thenceforth at that place was no looking back. As the taking distributer for Proton autos in Malaysia, it has besides became one of the state ’ s fastest emerging group. Gross saless volume increased quickly – from 7,494 units in 1985 to 140,968 units in 1997, averaging an one-year growing rate of 18.7 per cent. For the fiscal twelvemonth ended 31st December 1998, the group recorded a turnover of RM 3.95 billion with a pretax net income of RM 101.6 million.

2.0 CHANGES IN THE CAR INDUSTRY

In Malaysia, for the last 10 old ages, the auto industry was practically taken over by Proton trade name. Of the vehicles sold yearly, 70 per centum are Proton gross revenues. Some 25 other makers compete for the staying 30 per centum. The old best selling auto like Nissan Sunny was wholly wipe out about nightlong since Proton immense coup d’etat in market gross revenues more than 10 old ages ago. Over the following decennary, the Malayan Proton vehicle market is expected to increase near to 90 per centum from 230,000 units at present to about 375,000 units in the twelvemonth 2000.

3.0 HOW PROTON REMAIN NO.1

3.1 Marketing-Mix Schemes

The most basic marketing-mix tool as in Product, Proton offers unimpeachably the best warranty bundle of any maker. The most of import portion being the power train guarantee, which guarantees the engine and transmittal assemblies against failure for six old ages.

The following most aggressive marketing-mix tool in Proton gross revenues is Promotion and Place. Proton through EON as distributer has been able to set about to pass on efficaciously and promotes its merchandise to the mark market. It has set up communicating and publicity plans extensively dwelling of advertisement, gross revenues publicity, public dealingss, and direct and on-line selling.

The really first publicity Proton used was to form the auto calling competition, and it was from here that a certain trade name belonging nationalism towards Proton SAGA name was instill among Malayan. The authorities itself besides unrelentingly prosecute the publicity of Proton auto on a state broad graduated table with the Prime Minister establishing about every new theoretical account class in the Proton auto line of descent. This itself has been widely covered in all major newspaper for the benefit of market trade name consciousness.

As in late the Prime Minister as a premier mover in advancing Proton autos have launched legion universe events viz. , the World Cup Golf ‘ 99, and Le Tour De Langkawi, presenting a Proton auto to its victor. The recent accomplishment of Malayan jocks who had set and broken records in Kuala Lumpur 98XVI Commonwealth Games was besides non forgotten, as the jocks were each awarded a Proton PERDANA.

Besides this Proton through its selling arm EON, have besides been patronizing universe events to advance the auto viz. , FIFA/Coca Cola IXth World Youth Club, 34th International Youth Skill Olympics, Motor Rallying Activities and the Malaysia Thomas Cup squad to reconstruct the badminton glorification. These intensive publicities particularly at universe maps have however promoted Proton autos to a huge bulk of people in Malaysia every bit good as overseas.

Proton besides tried to show its markets strength by set uping a national record of 2713 Proton autos in perfect convoy at the Penang Bridge Merdeka Proton Drive for the Guinness Book of World Records. This will certainly convey about trade name belonging nationalism. Further to that, Proton carried on lastingness advertisement by making a successful parachute leap at the North Pole utilizing a Proton WIRA 1.5.

Recently in a promotional blitz to excite demand for the automotive industry and to help the state ’ s economic recovery attempt, national auto distributer EON promoted the weekend mega EON Auto Carnival – The Main Event. Hundreds of new autos were sold at this carnival. Aside from this, Proton besides supply refurbished and used autos to be sold at EON Motoria Autofair as to aim the following lower income group.

The following aggressive marketing-mix tool by Proton is Pricing and its convenience. Here Proton decides on good for value monetary value, price reductions and good recognition term.

Besides the aggressive advertisement, promotional and gross revenues schemes being adopted by EON, the authorities move to loosen up the end-financing opinion for vehicles below RM40,000 to 85 per cent and the extension of the footings of refund to seven old ages have besides been a conducive factor to the addition in gross revenues. EON ’ s paradigm displacement in selling is aimed at doing auto purchases more low-cost. This will certainly be welcomed by many Malaysians who may hold encountered troubles in acquiring finance in the past times.

In the recent economic downswing, EON have besides managed to re-categorize its pricing. Customers have shown peculiar involvement in the no-frills Proton Iswara 1.3S Aeroback that was being promoted at an low-cost RM29,683. In a short period, 3,160 units for all discrepancies of this theoretical account were sold.

The thrust to sell remains a high precedence at all degrees in EON despite a dampened market. The company is besides offering a RM4,000 price reduction on the new Proton Perdana 2.0 SEi Auto ( corporate edition ) to pull the executive and fleet market. At one clip, a buyer-get-buyer fillip inducement programme of a service salvation voucher valued at RM300 is besides offered to proprietors of Perdanas who introduce new clients to the pleasances of a Perdana ownership.

On the mentality, EON is confident of the gross revenues for Proton vehicles increasing in tandem with T

he country’s economic recovery.

In an effort to command the monetary value farther, EON and the authorities have besides:

1.  Raise freedom of excise responsibility on Proton autos from 50 per cent to 70 per cent for a limited period. ( This meant a loss in Government gross of RM 126 million in 1998 ) .
2.  Widen the 50 per cent freedom on excise responsibility for Proton ’ s Tiara for an extra 6 months. ( Loss in Government gross for 1998 at RM 35 million ) .
3.  Eliminate optional accoutrements to take down the monetary values of Proton autos by about 10-12 per cent from the current monetary value of the auto.
4.  Suspend temporarily the 13 per cent import responsibility on Proton ’ s constituents as an incentive to export to new markets, which are consistent with the WTO regulations. ( This release cost the Government RM 58.3 million in gross in 1998 ) .
5.  Proton besides trives on the discriminatory authorities intervention, paying merely 13 % responsibility in imported parts while it ’ s challengers forked out 42 % .

Ideally, the strategic vision for PROTON is to be a planetary automotive maker, able to vie with emerging auto manufacturers in all markets. A pre-requisite towards recognizing this vision is through making the degree of economic system of scale production therefore enabling production at low cost degrees.

As portion of its long term capacity enlargement program, the edifice of its new works in PROTON City, Tanjung Malim, 90 kilometers from Kuala Lumpur, marks a important milepost in achieving the car maker ’ s vision.

PROTON’s vision is to construct an incorporate automotive metropolis that will supply the necessary substructure and resources to back up high volume fabricating operations and enabling low unit cost production.

As an illustration, PROTON’s sellers will be incorporated into the metropolis ’ s programs for easiness of parts bringing based on the Just-In-Time bringing system. Vendor mills will be built alongside PROTON’s works to organize closer networking between PROTON and its supply concatenation.

3.2 Effectiveness Strategy

The Proton ’ s scheme, in retrospect, was a lesson in effectivity:

• The Merchandise: Well-known national auto or besides known as “ kereta rakyat ” , sedan household size, mean design and cheap stuff.
• The Monetary value: Value pricing and lowest in the rider auto scope.
• Distribution: Extensive distribution Centres ( EON ) , one at every town with lively salesrooms.
• Selling: Proton appointed exclusive distributer EON, to to the full concentrate on Proton trade name.
• Ad: Aggressive advertisement in all major media, particularly print media and Television with strong authorities support.

4.0 PROTON SHORTCOMINGS AND IT ’ S FUTURE

The Malayan auto Proton Wira ’ s waiting list is approximately 6-month as it is ; and they will non sell the auto to you unless you trade in an old auto. It is racket truly. And the Salesmen, they do non come to you any longer, you go to them if you want to purchase a Wira auto. Even if you go to them they still avoid you ; ( because they can non present? ) . And if you have the money you still can non purchase the auto. Probably because Proton Wira is the cheapest auto of its category ( other autos of the same category are taxed so to a great extent that they can non vie reasonably ) .

And now with the export of the Proton Wira, it has made it a hard trade good to get in Malaysia. Most will wondered why they call it a Malayan auto at all if Malayan have to wait 6 months to purchase the auto? With a waiting period of 6 months ( and holding to merchandise in a 2nd manus auto to acquire a new Proton Wira ) is it truly deserving while purchasing it? But so purchasing another brand of auto one would be branded as disloyal. Waiting in line for a Proton, even when you finally acquire one, the salesman offers you X ringgit if you are willing to give it up to person else. The grief starts after you drive it place. Then you realize the pride of the state comes with a few rattlings and noises. Thingss come off easy. Sometimes, the wireless comes off in your custodies. And this is NOT a security characteristic. And, if you have been awake in the last few old ages, you would cognize that the National auto has been steadily lifting in cost over the old ages. Reason: Hankering. A hankering for net income.

The criterions for Proton is besides far below what you should acquire for the money you pay. Partss are replaced non knocked because they are easy crushed on impact, therefore doing it worthless for strike harding.

The Proton was supposed to be an low-cost auto for the mean Malayan. With it ’ s entry into the Malayan market more than 10 old ages ago, within a few months revenue enhancements on foreign low cost autos ( like the antic Sunny Extra ) was increased seting it out of range of most Malaysians. It became ‘ the best merchandising autos of all time ’ due to unjust advantage. Not that it was of high quality, it does non run into the minimal criterions required by, state UK, Australia.

When one looks at the broader image, Proton is a suffering failure. It has made autos less low-cost for the mean Malayan. It has given the Malayan consumer less pick when purchasing a new auto. It has made EON, a non-company prior to the being of Proton, THE most powerful auto franchise in Malaysia, despite consistent ailments of hapless client service. And, as you say, it has given Malaysians a poorer quality auto than they could hold bought for the same money before the import duties were imposed.

The justification for the protections that Proton enjoys is called the baby industry statement. Simply said, as a new industry Proton needs an excess border to vie against imports. Duties on imported autos increase their monetary values doing Proton autos more monetary value attractive. However, duty on imports should be bit by bit lowered to maintain Proton awake.

Now that Proton is so really popular and such a great auto, the authorities still can ’ t afford to take off the duties on other autos. If people have already realized that the PROTON is a good auto ( as claimed ) , so it does non necessitate to be protected. It is past the newcomer phase and now must larn to stand on its ain pess. Let EON come in a free market place … If it is genuinely good, it will last, otherwise it will DIE.

This will non go on until 2003 … . when the Asian Free Trade Area ( AFTA ) takes full consequence.

5.0 Selling Analysis

5.1 SWOT Analysis

Strength Identified

1.  Well-trained sales/service force conformity to the demands of clients.
2.  Wide distribution Centres.
3.  Efficient production reduces the cost and sensible monetary value to give value to the merchandise.

Failings Identified

1.  Long bringing agendas.
2.  Customer claims.

Opportunities Identified

1.  Effective distribution.
2.  Lower to Medium category cliente – market portion.
3.  Currently monopoly of trade.
4.  Marketing communicating.
5.  Assortment theoretical accounts to pull clients.

Menaces Identified

1. AFTA. in the twelvemonth 2003.

6.0 Decision

I believe 90 % of Proton purchasers choose Proton over the imports because of monetary value. Once you lift the duty as it will be in 2003, you

1.  loose the hard currency flow from the duty
2.  free enormous market portion for the Proton.

Therefore, the auto market industry which has been monopolize by Proton will surely alter in the following 3 old ages to come. No uncertainty, anyone could populate with a Proton ( lived with one for over 5 old ages ) , but I don ’ t believe its many ’ s dream auto except for the the monetary value characteristic. Proton hereafter may travel on but it surely will non be the No. 1 auto after the twelvemonth 2003.

When AFTA is in force ( in the twelvemonth 2003 ) , most of the other auto monetary values will besides be down. AFTA pushes for release of trade in the part through the riddance of intra-regional duties and the riddance of non-tariff barriers. Then Proton will hold to vie with the same equal construct for market portion. It is popular because it is the cheapest auto in Malaysia. It is the cheapest after they impose 300 % revenue enhancement on import autos. Proton selling scheme is by and large built upon this low monetary value distinctive difference to keep as No. 1.