Proton’s new CEO has introduced numerous conditions for dealerships and service centres

By AFIQ AZIZ / Pic By TMR

Proton Holdings Bhd’s new management has set a high bar for Malaysian distributors to meet in a dealership overhaul that may see only the fittest to survive.

Since he took charge of the Malaysian carmaker last year, Geely-appointed CEO Dr Li Chunrong has introduced numerous conditions for dealerships and service centres that are meant to strengthen the brand and improve buyer experience.

Li was appointed CEO after Zhejiang Geely Holding Group Co Ltd took 49.9% stakes in Proton from DRB-Hicom Bhd, which retains a 50.1% stake, last year.

But, the changes which Li is implementing will also mean that some of Proton’s oldest dealerships may not make the cut.

The first hurdle, which will cull 280 dealers and service centres, is Proton’s new requirement for all of them to upgrade their premises into a one-stop dealership and service centre, dealers who spoke to The Malaysian Reserve said.

This means some of Proton’s partners, which only sell cars, will have to merge with partners that only offer services.

So far, only four dealerships have signed on to Proton’s new Dealers Network Upgrade agreement, according to a statement by the company last month.

The four dealers were part of a group of 28 top dealers which Proton brought to visit Geely outlets in China last year, and who were convinced that any investment to upgrade their facilities would be repaid in more businesses in the future.

According to Proton media releases, the four companies are confident that Geely will have the know-how and finances to successfully implement a turnaround plan for the Malaysian carmaker.

“We will have a luxurious showroom which can accommodate 11 display cars, 14 service hoists, 10 body-and-paint bays, 30 customer parking lots as well as a new lounge area,” Setia Gemilang Auto Sdn Bhd director Andrew Quek said.

His outlet would be completed around June this year.

Another dealer, Datuk Shamsudin Nor of Pantai Bharu Group of Cos said its new RM4 million standalone facility will be a Proton dealership.

During their visit to Shanghai last year, the dealers were also shown the Geely Boyue, an SUV which the company said would be crucial in its turnaround plan for Proton.

While Proton was wooing its top dealers in China, smaller dealers, some of whom have been partners for 20 years or more, felt left out.

They said the new Proton requirements are too much for them to meet and have asked for some flexibility.

“It is understood that to qualify ourselves as a true dealer for any brands, the requirement of a sales, services and spare parts (3S) outlet — ideally should be fulfilled.

However, to be a three-in-one (stop centre) is really beyond the reach of any of us, especially for those who are operating in Johor, the central region and Penang, where the rentals and prices of land are very high,” a dealer, who did not want to be identified, said.

He said Proton should also show some flexibility in requiring all dealers to provide the 3S centre under one roof, which would require a huge investment as it needs a large single space.

“They should allow it if we can provide these three services within the same general location if not under one roof,” he said.

This request is unlikely to be approved. However, Li has already said a one-stop centre is what Proton customers expect.

“Now, (the customer) do not have to go from one place to another just to get your car fixed. We will ensure that the upgraded outlets can cater to all your sales and service needs, which ultimately saves your time,” Li said in a statement last month.

In order to build a new standalone 3S outlet, which requires about 18,000 sq m area, the dealer said he has to spend up to RM3 million, excluding the land price.

“We need to have at least 10 service hoists and a showroom that can accommodate eight display units at one time,” the source said, adding that another RM700,000 is required to reinvent its outlet corporate image.

Another dealer said they have been asked to upgrade in the past on promises of better products and sales, but these promises had not materialised.

“Now, they want us to spend money in anticipation of another new model, the Boyue,” he said.

The dealer, who also did not want to be named, said in 2015, Proton made a deal with Suzuki Motors Corp to collaborate on models.

The collaboration allows Proton to jointly develop a product for the compact car segment and thus help boost sales.

It was reported that the model was supposed to be manufactured at the Tanjung Malim plant from August 2016 and to be distributed and sold under the Proton brand.

It was also envisaged that additional models will also be mutually studied.

“However, after three years, only the Ertiga was launched and available at our outlet,” the dealer said.

He said the Suzuki deal was also bad for existing Proton dealers because it resulted in more competition when the Japanese brand outlets were converted to Proton outlets.

“If the management (Proton) does not consider some flexibility tackling the issue, I wonder how Proton would rely on the only 30 or so dealers who will survive to sell their cars,” the source said.

“With the current 13,000 monthly request for quotation, one dealer will have to sell around 430 cars per month,” said the dealer, adding that failing to do so will only increase their inventories where upholding interest is incurred. At this stage, it is unclear how Proton would convince most of its dealers to agree with the deal and embrace the challenging market.

Proton’s sales dropped to 70,991 last year, compared to 72,291 units sold in 2016.