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Proton a drag on DRB-Hicom

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PETALING JAYA: National automaker Proton continues to be a drag on owner DRB-Hicom Bhd’s earnings, following a nearly 24% year-on-year sales drop in the first fourth months of this year.

Proton sales from January to end-April were 32,654 vehicles (compared with 42,826 vehicles a year earlier). In April, in terms of sales ranking, Proton (4,972 vehicle sales) was also in an unlikely fourth place behind Japanese marques Toyota (6,032 vehicles) and Honda (6,562 vehicles) according to data from the Malaysian Automotive Association.

Perodua enjoyed its usual top spot (17,584 vehicles) in April. Hong Leong Investment Bank (HLIB) automotive analyst Daniel Wong said the decline in Proton sales was mainly due to stiff competition, resulting in a “car buyers’ market” where attractive rebates and offers are common.

“This meant that the price gap between national and non-national marques has narrowed significantly. There is also brand perception. It has reached the point where by topping up RM100 or RM200 more in monthly installments, car buyers can get a non-national marque which they perceive to be better,” said Wong.

Another analyst with a bank-backed brokerage said Proton’s steep sales drop in April was also partly due to consumers adjusting to the post-goods and services tax (GST) environment.

“Proton customers tend to be in the low to mid-income segments; so they are more sensitive in terms of post-GST blues. We are not surprised by the belt-tightening seen in the Proton sales numbers,” he said.

“The sharp drop in Proton’s April sales was also magnified by the high sales of 10,528 Proton vehicles in March, which saw unusually high monthly auto sales ahead of the GST implementation,” he pointed out.

Also, the analyst noted that sales of the Proton Iriz B-segment five-door hatchback, launched in September 2014, had been slow.

In a CIMB Research report in early April, auto analyst Azman Hussin had said returning Proton to sustainable profitability remains the biggest task for DRB-Hicom due to the former’s size and impact on the group’s bottom line.

Azman noted that although sales of the Iriz started to pick up in March with about 4,000 units sold, it was still short of Proton’s target of 5,000 units per month.

He also said Proton’s initiatives to return the company to profitability include vendors’ and dealers’ rationalisation to reduce production costs, improve sales and provide faster delivery of new cars to customers.

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