Malaysian analysts upbeat about Geely-Proton deal

KUALA LUMPUR - Malaysian analysts have given positive feedback on the partnership between China's Zhejiang Geely Holding Group and Malaysia's car maker Proton as it paves way for Geely to expand into the Association of Southeast Asian Nations (ASEAN) market.

The partnership gives Geely an expedited route into growing ASEAN markets while offering Proton access to new product platforms and manufacturing expertise, said Alexander Chia, an analyst with RHB Research Institute said in a report on Wednesday.

"Proton would now have a realistic chance of reclaiming its leadership position in the domestic automotive market with Geely's backing, in addition to making significant inroads into regional markets," he added.

Last Friday, Proton's owner DRB-HICOM signed an agreement with Geely, whereby the latter will have a 49.9-percent stake in Proton for a consideration of 460.3 million ringgit ($107 million).

CIMB Research's analyst Mohd Shanaz Noor Azam is also positive on the deal as this should expedite a turnaround for Proton.

Based on the agreement, Proton is required to relocate its current manufacturing, testing-related research and development (R&D) and administrative activities at the Shah Alam plant to its manufacturing plant located in Tanjung Malim.

The deal is expected to be completed by the fourth quarter this year. It still requires nods from DRB-HICOM's shareholders and regulatory authorities in China.

However, Choo Ping Khoon with Kenanga Research raised his concern over execution risk in the new partnership to revive Proton over the longer term.

"While Geely is more popularly known for its successful acquisition of Volvo, the ability of Geely to assist Proton from technical and marketing perspective as well as to penetrate new markets remains a concern given that Geely is also a relatively weak brand from a global perspective with a global market share of less than 5 percent," he said.

Therefore, he opined that Proton still has to deal with the challenges posed by increasing competition and a weak brand perception.

Under the agreement, Proton will be granted a period of five years to manufacture, sell, market and distribute any four current and future Geely platform vehicles under the "Proton" brand name in Malaysia.

It is noted that Geely Boyue will be the first-ever sports utility vehicle line up for Proton.