Proton on a winning streak

By EUGENE MAHALINGAM | 1 December 2019


PETALING JAYA: When Proton Holdings Bhd unveiled its revamped tiger head logo a couple of months back to announce that the company had been “uncaged, ” it wasn’t joking.

It’s been over two years since the national car company and China’s Zhejiang Geely Automotive Co Ltd (Geely) tied up. Since then, Proton has been steadily clawing its way back to the top of the automotive industry.

For the first 10 months of 2019, while the total industry volume has fallen 1%, the national car company’s sales have jumped a whopping 46% year-on-year.

Li Chunrong, Proton’s chief executive officer and the man behind the reins of the tiger marque, has been hard at work to turn around the ailing automotive company and steer it back to its former glory.

Over the past 20 months, the national carmaker has launched its first-ever sport-utility vehicle (SUV), the X70, as well as refreshed models of the Iriz, Persona, Exora and Saga.

“By Malaysian standards, five models in less than two years is fast, ” Li tells StarBizWeek in a report published on Saturday.

Sales for the five launched models have also been swift.

According to Li, the strong demand for the X70, which was launched last December, continued for a 10th consecutive month as it comfortably retained its position at the top of the premium and executive SUV sales rankings.

“Over 24,000 units have been delivered thus far, making it Malaysia’s fastest-selling C-segment SUV, ” he says.

“We sold 4,273 units last month and for the first 10 months of the year, the cumulative total is 30,331 units, which is a 26% increase over the previous year, ” says Li, adding that the Exora, Iriz and Persona also saw an increase in sales.

“We sold 4,273 units last month and for the first 10 months of the year, the cumulative total is 30,331 units, which is a 26% increase over the previous year, ” says Li, adding that the Exora, Iriz and Persona also saw an increase in sales.

Meanwhile, the revamped Saga, which was launched in August, has received more than 28,000 bookings. Last month, the model posted its highest sales figure in over four years.

“We sold 4,273 units last month and for the first 10 months of the year, the cumulative total is 30,331 units, which is a 26% increase over the previous year, ” says Li, adding that the Exora, Iriz and Persona also saw an increase in sales.

As a whole, sales for the trio, along with the Saga, have increased by 21% this year. This accounted for 78% and 68% of Proton’s total sales in October and for the whole year, respectively.

The strong sales have also been reflected in the financial performance of parent company, DRB-Hicom Bhd, which recorded a net profit of RM40.08mil for its third quarter ended Sept 30, compared with a net loss of RM11.42mil in the previous corresponding period.

With the solid sales performance this year, Li says that Proton has revised its sales target to 100,000 units for 2019 from 93,000 units earlier.

“Because our new product performance is very good, during our last board meeting in August, we were told to revise our target. As at the end of October, we think it’s possible to achieve that, ” he says.

But what was it that spurred demand for Proton cars, at a time when automotive sales growth as a whole across the industry has been slow?

Li says models like the Saga and Persona saw a number of external and internal changes.

“For the Persona, we changed the interior, improved the features and reduced the price. With that, sales more than doubled, because people feel we have improved the product. As for the Saga, which achieved a 51-month high in terms of sales, we changed the interior and exterior. We improved the transmission and received good feedback.

“When we design all our facelifts, we listen to our customers. We ask them what they want and also ask ourselves what are the problems that we have. Then, we make the necessary changes and I believe that’s why customers like our products.”

Efforts were also made to improve the quality of the product. Li says Proton’s demerit points have fallen drastically over the past two years.

“Two years ago, our quality, our demerit points, stood at 6,388. Today, it’s close to 1,200, which is close to Geely’s level. So, we’ve improved a lot.

“We have solved all the big problems that have been plaguing the product. Now, we need to tackle the smaller ones, flaws that only professionals can detect. These are defects that are so tiny, it’s something that the average buyer cannot see or feel, ” he says.

Another boost to the national car company is that lending approval rates have also improved.

“A couple of years back, most of our customers had a low credit rating, so interest rates were high. However, today, that has changed. The interest rate for our X70 is 2.33%, which is low because the credit rating of our customers has improved and this had helped boost sales.

“For the Persona, Iriz, Exora and Saga models, interest rates are also below 3%.”

Turning around Proton

Proton, set up in the early 1980s when Tun Dr Mahathir Mohamad was the Prime Minister for the first time, had undergone several rescue exercises before Geely came in.

The government had injected more than RM15bil into Proton but this did not stop the national car company from bleeding and piling up on the debt.

Geely completed its acquisition of a 49.9% stake in Proton from parent DRB-Hicom in September 2017. Since then, Li, who works six days a week, 12 hours a day, has been striving hard to turn Proton around.

A Chinese national, Li’s appointment as head of a Malaysian car company was not without resistance.

“There were problems as more than 90% of our dealers disagreed with what we were trying to do and many of them complained to the government. I’ve worked in China for more than 30 years. During that time, I met with no more than four ministers. But within three months of working at Proton, I met with more than 10 ministers, ” Li says.

However, the complaints stopped after six months of Li heading Proton, as the company started delivering results.

One of the biggest problems that needed to be tackled was the sub-standard level of the national car company’s vendor network, he says.

“When I joined Proton, I travelled to more than 20 dealers and found that only 20% was able to offer the complete service needed by our customers. That means more than 70% were not able to provide full-fledged, after-sales services. Before this, customers could not trust us and it was why Proton’s sales volume kept dropping.

“From the beginning, our senior management decided that we needed to set up more 3S (sales, service and spare parts) and 4S (sales, service, spare parts and body and paint services) centres.”

To date, Proton has 108 3S and 4S centres.

“We have 90 1S centres. At the moment, we have 198 dealers and branches, so more than 50% of our network is capable of delivering the relevant services that our customers need.”

Getting the vendors to upgrade their facilities was also not an easy task.

“The vendors asked ‘why do you push me to invest?’ I told them ‘I’m trying to push you to make money.’ Because, if you have good service, then you can have good sales. Today, 95% of dealers totally agree with me, ” says Li.

Li has a meeting with the group’s dealers on the first day of every month,

“We don’t need to learn from China. We can learn from Malaysia. Regular meetings means better communication, ” he says.

The X70.
The X70.

Changing the culture

On Sept 29, 2017 when Proton announced Li’s appointment as the company’s CEO, he pledged: “My job is not to look at the past. I will work day and night to make sure Proton is strongly successful.”

One of the first things Li had to do was to change the group’s corporate culture – which was not an easy task.

“For a company, No. 1 is the product; behind that is the people and after that, the culture. This is very important and we spent two years finalising the group’s corporate culture.”

By “group, ” Li means consolidating the work culture of Proton, DRB-Hicom and Geely.

“We call it TARI - teamwork, achievers, respect, and integrity, ” he says.

Since working in Malaysia, Li has also learnt to speak Bahasa Malaysia, although he is humble when asked how fluently he can speak: “Sikit-sikit (a little bit).”

As part of his initiative to improve the work culture of the vendors, Li encouraged the owners of the Proton branches and dealers to buy their own X70 models for their own usage.

Many complied, but some were less than eager to do so. To these group of individuals, Li would confront them directly and say to them to them in Bahasa Malaysia: “Macam kacang lupakan kulit (forgetting your roots.)”

At the core of it all is the desire to become No. 1, says Li. Currently, Proton is the second-highest selling car company in the country after Perodua.

“We ask ourselves ‘are we No. 1 in Malaysia?’ Right now, the answer is no. That means we still have some problems that need to be resolved. We need to understand what they are. We must identify the issues, not hide from it.

“We need to benchmark ourselves against good companies, be it local or foreign. Only then will we find out where our disadvantage is. We have to work continuously, otherwise how can we produce five good models in 20 months?”

With the increase in demand for Proton cars, the company has had no choice but to also ramp-up production, says Li.

“Our capacity has been gradually increasing. Before, it dropped as the number of vendors reduced, affecting our capacity to produce certain parts.

“Last year it was 65,000 units and this year, we have ramped it up by another 40% due to higher demand. We want to achieve 100,000 units in sales this year. Next year, we hope to increase the capacity further.

“We need to improve our capacity not just for ourselves, but also for our vendors. At our Shah Alam plant, we are already considering doing two shifts because we want to produce more.

“Our models already have a long waiting list.”

So long is the waiting list that many customers have reached out to Li via social media, urging him to speed up delivery of the models.

“Some people can wait, but others can’t and they won’t. We can’t make our customers wait too long, as many will end up becoming frustrated and changing their minds, ” says Li.

Roaring back

After a gap of 40 months, Proton returned to second spot in total sales for Malaysia’s automotive market in July this year. The last time the company was in a similar position was in March 2016, while the last calendar year it finished second was in 2015.

The goal is to return to No. 1 eventually and Li has an idea of by when that will happen.

“We came up with a strategy two years ago from our board meeting that every year, we’ll produce one new model. By the time we have eight or nine, it will be enough to become No. 1.

“We need to focus on efficiency. Every new model has to be a star model. Each car must hit sales of more than 2,000 units. Otherwise, there is no efficiency, ” he says.

Should Proton reach the top spot in Malaysia, it aspires to become the third-largest player within Asean, Li says.

“To be successful overseas, you need to be successful domestically. If you can be successful in your own country, you can replicate your success in other countries. We have representatives and ambassadors in different countries that can help us gauge the markets better.

“We are now considering going to the other countries, but it is not easy. We have to conduct tests before we enter a prospective market. Otherwise, we will damage our brand, ” he says.

Proton’s main export markets include Brunei, Mauritius, Jordan, Pakistan, Iraq, Zimbabwe and Egypt.

Li admits that Proton has a “good, glorious export history.”

“The highest we’ve ever exported was more than 20,000 units annually. But in 2017, we only did 248 units. Why? Because of our products. If they can’t meet the requirements of the other countries, then you must improve on them.”

Li says Proton exported more than 1,000 vehicles last year, a level it hopes to maintain in 2019.

“Next year, I believe we can export more, because we have new products and have updated our current models. You can achieve big jumps in your exports with the right products.”

On the local front, the automotive industry is abuzz about when Proton will be launching its next new model – a smaller SUV that many are tentatively calling it the “X50.”

Li is keeping mum on the details of this model.

“Whether it’s going to be called X50 or X55, yes, it’s an important model for us. But then again, for us, every model is important.”

For now, Proton is focusing on producing a completely-knocked-down (CKD) variant of its X70, which is set to hit the market by early next year.

With more local content, many are hoping that the CKD variant will be slightly cheaper than its current completely-built-up variant. For now, Li is not revealing the CKD model’s final price.

“We sometimes decide on the pricing of the model a day before the launch because of competition. If we come out with the pricing a month or two before, our competitor will come up with a more competitive price tag.”

To match up to the competition, Li says Proton is working hard at improving the efficiency of its vendors.

“If you want to become a global brand, you need global vendors. Currently, our vendors are Saga and Persona vendors. Now, they need to become X70 vendors. The X70 is a global product. We are on track but we need time.”

Li says a significant number of Proton vendors are working closely with their Geely counterparts as part of the group’s aim to become a global brand.

“They are leveraging on each other’s expertise by getting technical assistance or setting up joint ventures (JVs). We already have a number of JVs set up and also have 47 local vendors that can produce more than 300 components for the X70.

“So, I believe that when we launch our X70 CKD, these vendors are ready to go to the next level. If you produce products for the X70, then every other model that we produce for the Malaysian market will be of the same high standard.”Li says Proton is also exploring the possibility of co-developing future models with Geely.

“For our current models, Proton can take the lead and Geely can support. For the X70, Geely took the lead and Proton provided the support. So it depends on the model. We can learn from each other.“We have a global board of directors at Proton and our senior management is international. Overall, there are 12 nationalities.”The art of war

While Proton has overcome numerous challenges to win back the trust and loyalty of its customers, the race is far from over for the national carmaker. In fact, it is just beginning.

Li admits that there are still numerous challenges on the horizon that Proton needs to face head-on, as it strives to be on top of the game.

“We know more challenges are waiting for us. If you read Sun Tzu’s The Art of War, to achieve victory, you must be in a position where other people cannot defeat you; but you must always be in a position to defeat your enemies.

“To achieve this, it is important to have products of good quality and price, harmony among your workers and good communication with them, so that they will enjoy working. If you can do this, then nobody can defeat you. Only you can defeat yourself.”

 

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