In Cars, Local News, Proton / By Jonathan Lee / 12 February 2018 10:03 pm / 105 comments

Proton has just released a statement addressing the concerns of the Malaysian Association of Malay Vehicle Importers and Traders (PEKEMA), which have surfaced in an Utusan Malaysia interview with PEKEMA president Datuk Zainuddin Abdul Rahman.

In the interview, Zainuddin said that Proton’s new leadership, spearheaded by chief executive officer Li Chunrong, no longer places importance on the bumiputera agenda, adding that its new policies are putting undue pressure on dealers. Among them, 1S dealers – which make up the majority of Proton outlets – are given only a year to upgrade to 3S centres in order to be given an opportunity to sell the company’s first ever SUV, based on the Geely Boyue and set to be introduced in the fourth quarter of this year.

Zainuddin also said that Proton is reducing dealer profit margins from four to three percent, discontinuing financial aids such as Payment After Registration (PAR), and implementing restrictions on dealers should vehicle stock go unsold after 60 days, as well as providing a special 10% discount directly to associations, instead of leaving it to dealers.

Additionally, potentially unhealthy competition among bumiputera and non-bumiputera dealers, along with a non-bumiputera leader said to be unwilling to help bumiputera dealers were also listed as factors that could lead to the downfall of PEKEMA dealers.

In a point-by-point rebuttal, Proton stated that dealers are actually encouraged to complete the upgrade to 3S and 4S centres between 2018 and 2020. The 2018 target is merely meant to substantially increase the number of 3S and 4S centres – which currently make up only 30% of its dealer network – in order to enhance Proton’s overall customer experience by the time the new models enter the market starting this year.

The new Proton SUV, based on the Geely Boyue, will only be sold through 3S and 4S centres

The national carmaker said it is aware of the substantial capital required for the upgrade, and is offering upfront support as well as an increased profit margin on cars sold for up to three years. Proton has also lowered the monthly volume threshold required for dealers to enjoy the maximum profit margin available – previously 40 units for a 4% margin – although it did not specify the new threshold or margin.

This is in line with the current challenges faced by dealers, Proton said, adding that it will continue to monitor the situation to ensure business growth is achievable. The company is also providing a quarterly incentive scheme throughout the year, enabling dealers to earn extra income by exceeding their sales targets; it will also provide state incentive support for on-ground activities.

With regards to the restrictions on dealers due to unsold cars, Proton said that the 60-day period it has provided is significantly longer than the usual 14-day period that is industry practice, and comes with terms and conditions. This is done to manage dealer cashflow, giving them additional time to move their current stock without worrying about their accounts being blocked.

Proton added that the Payment After Registration (PAR) scheme is not practiced by other car companies in Malaysia, and has been ended in light of the company’s tight financial situation. It said that it provides a total of RM650 million in dealer financing every year, which is putting a significant strain on its cashflow.

The issue of direct discounts to associations has also been tackled – Proton said that corporate fleet sales made up less than five percent of overall sales in 2017, so dealers are encouraged to focus on retail sales. The company also said that its aforementioned new margin scheme is meant to prevent disorderly marketing among dealers, and that Proton is guided by laws and regulations such as the Anti-Competition Act.

Proton sought to assuage additional concerns on the part of dealers, saying that upon the signing of the partnership agreement with Geely, the company established a 10-year business plan focusing on products, operations and sales growth. It added that it conducted detail studies to come up with a comprehensive product strategy over the next five years, and with the infusion of Geely’s technology, expertise and capital, Proton is confident of forging a path towards a turnaround and sustainable growth.

It also said that the new SUV will be positioned as a premium model, and that Proton’s sales and service experience will be carefully managed as a result, in order to exceed customer expectations. As such, Proton’s 3S and 4S outlets will manage sales of the SUV exclusively, but 1S centres will still be allowed to sell the SUV through 3S and 4S outlets closest to them. This ensures that all dealers will have the opportunity to sell new Proton models – as long as all requirements are met.

Proton concluded by recognising the efforts made as well as the successes achieved by itself and its dealers up to this point, and that it intends for dealers to prosper instead of being burdened. It added that its turnaround process is long-haul, and that Proton, its dealers and business partners must first excite and serve the market as much as possible.

The company said that it hopes to grow its business with its dealers to create confidence in the public and enhance brand perception with a renewed customer experience. As such, its business model needs to focus on market requirements that are sustainable in the long term.