Sunday, February 11, 2018

Opinion: Proton Sells 4,783 Units in January 2018. Good, but not Great - And the Ignorant Folks at PEKEMA Do Not Want Change....How Unwise.

PROTON has reported that it had sold or registered 4,783 units in January 2018. This is a forecasted increase in the total market share for Proton. The company basically sold 1.1 cars out of 10 cars here in Malaysia for the month of January and it is actually up from the month of December, 2017. Proton also mentioned that the Proton Saga, Persona and Exora made up 80% of their total sales. The bread and butter as well as full sized MPV was the choice of customers.

However, according to Proton, they actually sold less cars compared to December '17 where ,4802 units of Proton cars were registered. Of course, when it comes to year-end sales, almost everyone had some sort of special promo price to clear off stock which is why the total market actually sold more cars in December than in January '18. 

But if you compare things with the other Malaysian car maker, Perodua, that company sold over 17,000 units in the month of January or about 4 cars out of 10 are Perodua. So it is obvious Proton needs to do a lot to catch up. But we have some people who are not happy with Proton's current business plans which actually NEED to be done.

PEKEMA, or the Malaysian Association of Malay Vehicle Importers and Traders have decided to voice out their grievances and want Putrajaya (i.e the Government of Malaysia) to intervene and stop Proton from asking vendors to cut cost of parts and upgrade their sales outlets from 1S to 3S status. The reason being that these traders would go out of business.

According to the Malaysiakini report, Proton has asked vendors to cut a minimum of 30% of the parts costs, upgrade their sales outlets from 1S to 3S and also bring down sales margins from 4% to 3%.  There were also stating that the fleet discounts given to GLCs, associations would also eat into their sales as people would go direct to Proton rather than dealers.

Actually this is a lot of bull. What these people are asking is for the current loss making business model to continue as it is. The people in PEKEMA must know that it PROTON were to maintain the current practices it would go bust. The only reason PROTON managed to stay afloat is with the help of the Malaysian government bailing them out and from what I hear, even the people inside the government are fed up of doing so. The people of PEKEMA somehow forget that the money used for bailouts would come from the taxpayer's pockets.

I personally think that what Proton doing is the correct thing to do. Firstly, in terms of cost cutting, the 30% request seems quite fair as some of these vendors have already been supplying parts to other manufacturers who either build or assemble their cars locally. These vendors are actually complying to many requests of lower costs. Some of these people actually supply to Perodua so why are they complaining? If you are of a certain quality, and you have already been supplying to other manufacturers, you should know that they are all asking for price cuts. The only issue that they can bring up is the time frame for the cuts to be made. How many months can the vendors take to bring down the price of the parts to the desired level. I think a time frame of 12 months could be fair. 

On the point of the upgrading of dealerships to 3S centres I personally believe that this is NECESSARY. These days customers want to have a fantastic customer experience. No one wants a sales or service centre which is like a roadside stall. If they walked into the latest outlet from Toyota, Honda, Perodua do you think they would like going to a shanty 1S outlet? This is actually a logical move to improve customer experience and customer contact points. Again I find it to be against good business acumen if PROTON maintains its 1S outlets in the current sales environment. Even the latest J.D Power report in 2017 basically claim that customer experience ranks as very important. Proton is still under the industry average and these people want things to remain the same?????

As for the smaller dealer margins, I think it also goes hand in hand with the fact that I have heard that PROTON wants dealers to hit certain sales quotas every month. If you do hit the quota, the dealer could actually live with the drop in sales margins. 

As for the request that PROTON stop giving discounts to larger organisations I think the people at PEKEMA should also ask other car manufacturers to stop giving discounts to GLCs and fleet sales. This is impossible as everyone is actually giving such discounts. I personally know Japanese and German brands who actually give corporate discounts and more. What is wrong with these PEKEMA people? It's like they haven't done business before.

If you think about it, all of these moves done by PROTON is about weeding out the non-performers from those that can perform. These is needed to streamline the company, make the company turn around and make a profit. PROTON needs to be self sustaining, and not run to the government for help. These people are not letting PROTON do this. If you start a company, you want it to be profitable. If you invest into a company (like what Geely has done), then it wants it to be profitable. 

The moves made is also quite reasonable to ensure that the eco-system survives for a long time and not constant government interference. PEKEMA must see beyond race and look at how business should be done. It is utter nonsense. 

Again, how can a company as large as PROTON survive on sales of under 5,000 units per month? This is 60,000 units per year. If this keeps up, a company with production facilities of around 250,000 per year and other overheads will die. It's as simple as that. PEKEMA needs to wake up. 

It's time for PROTON to get a little bit ruthless in order to stay alive.
[UPDATE - More here - Proton have officially replied and some more thoughts on the matter]


Ruzaimi Rahman said...

Really sad when this sort of people still think politic is above everything. They forget Proton now is owned by a global company. It is not PEKEMA who dictate supply and demand, the market does.

Rigval Reza said...

Which is why I was so darn disappointed with them after I read the news. These people are not going to be global players.