PSA Group (Peugeot Citroën) and Chinese group Geely, which owns Volvo, have entered a race to buy Proton, the struggling Malaysian carmaker. Both are set to submit rival offers in the coming days.
Proton owner DRB-Hicom, the Kuala-Lumpur-listed conglomerate, is seeking a foreign strategic partner to help the carmaker expand its range of vehicles and improve their quality. Geely is expected to bid as early as this week, .
Renault, part of the Renault-Nissan Alliance, had also been expected to bid, but has now dropped out, two sources told the Financial Times.
Proton, founded by former Malaysian Prime Minister Mahathir Mohamad in 1983, once dominated in its native market with three-quarters of all car sales. However, by 2016 its share of the market had fallen to 15% as it confronted cheap imports. In 2013 it set a target to produce 500,000 cars by 2017; however, in 2016 it made just 150,000 vehicles.
Geely’s main interest is thought to be Proton’s plant in Malaysia, which has the capacity to make 600,000 vehicles a year and – crucially – right-hand-drive cars. The Chinese marque currently only produces left-hand drive versions of its title brand. Right-hand drive markets include much of South East Asia, as well as Japan, India and the UK. More than 8 million right-hand-drive cars are currently sold every year across Asia, in countries including India, Pakistan and Bangladesh, which Geely wants to target.
Proton also owns UK sports car maker Lotus, which includes an engineering division which sells sports car technology to other businesses. However, Lotus overall made a loss of £27.6m (€33m) in the year to 31 March 2016, an improvement on a £39m (€46m) loss the previous year. There is no guarantee that Lotus will be included in the deal, but Geely is keen to use Lotus technology to improve the lightweighting of its vehicles.
It is possible that DRB-Hicom will retain a stake in Proton after the deal, but Geely is looking for at least a controlling 51% stake in the business.
For PSA, this would be chief executive officer Carlos Tavares’ second major expansion plan after it announced plans to merge with General Motors’ European operation Opel last week and aligns with Tavares’ plan to expand the business following his successful restructuring of PSA. Analysts questioned whether the Opel merger, which focussed on the mature European market rather than growing markets, was wise. This deal would therefore be a logical complement to PSA’s heavy European presence, with a focus of Proton on growing Asian markets.
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