The carmaker, which has been struggling in past years due to declining sales, is seeing signs of recovery following the emergence of China-based Geely which acquired a 49.9% stake in Proton in 2017.
In a statement reply to StarBiz, Zhejiang Geely Holding Group said the move to set up a factory in South Asia was “part of Geely’s commitment to help restore Proton to its position as a bestselling brand in Malaysia and also a leading Asean brand.”
Proton setting up factory in Pakistan will be its first facility in South Asia, tapping into a new market in a country with a population of 210 million.
The plant will be a joint effort between the Malaysian carmaker and its local partner Alhaj Automotive.
Hong Leong Investment Bank (HLIB) Research said the plant in Pakistan marks an important milestone for Proton to expand its export market and becoming an international OEM.
The research house reckons that Proton may not need to pump fresh capital expenditure into the plant in Pakistan as Proton will not own it.
This would, in turn, benefit DRB-Hicom in the long term.
“Al-Haj had already acquired land for an assembly plant for Proton cars nearby Port Qasim area in Karachi.
Al-Haj will own the assembly plant by itself, while Proton will provide the necessary technical support to Al-Haj,” HLIB said.
It reckons that Al-Haj is the exclusive authorised distributor and assembler of Proton vehicles in Pakistan, following an official signing ceremony back in August 2018. It was reported back then that Al-Haj planned to introduce modern and high tech vehicles in different categories including entry level sedans, mid-level sedans, crossovers/SUVs, MPV and hatchbacks in Pakistan.
“We are positive with the new Proton plant set-up in Pakistan, in order to cater to the local Pakistan market, as well as potentially, the regional South Asia market.
“We understand that Proton will not incur capex for the Pakistan assembling plant, as Proton does not own the plant,” HLIB said in its recent report.
It maintained its “buy” call on DRB-Hicom with a target price of RM2.58 on the back of strong demand from Proton’s first SUV model, the X70, which set a precedent to the next model launches by Proton.
“We believe the strong demand for Proton’s new X70 will provide confidence to the market on Proton’s subsequent new model launches (based on Geely platform),” HLIB said.
Three months ago, Proton launched its first SUV model, the X70, which has boosted the carmaker sales significantly.
Proton’s sales rose 42% year-on-year to 12,300 units in the first 2 months, of which almost half was from SUV X70 sales.
The SUV X70 sales had also boosted DRBHicom earnings.
The group recorded a net profit of RM73.02mil for its third quarter ended Dec 31, 2018, compared with a net loss of RM70.03mil in the previous corresponding period, due to better operating financial performances from all of its business divisions.
Revenue in the third quarter rose to RM3.17bil from RM2.9bil a year earlier.
“The higher revenue was contributed by the better performance of the automotive companies, including the sale of the X70 SUV by Proton, which was launched in December 2018,” DRB-Hicom said.
Source: The Star