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Geely Eyes EV Foothold In Southeast Asia With US$10bn Malaysia Hub

Geely Eyes EV Foothold In Southeast Asia With US$10bn Malaysia Hub

08 Nov 2023

Chinese automaker Geely has teamed up with Malaysian partner Proton Holdings to stage a comeback in Southeast Asia’s electric vehicle market, fuelled by a US$10 billion investment in Malaysia.

One of the biggest attractions at last month’s Malaysia International Motor Expo in Kuala Lumpur was an electric vehicle from Smart Automobile, a joint venture between Geely and Mercedes-Benz Group.

The EV on display was also the first to be sold by Proton. A Proton subsidiary started taking preorders for the compact in September, with a goal to start deliveries by the end of the year.

Last year, Proton reached an agreement with Smart to be the official distributor of the brand’s EVs in Malaysia and Thailand. This September, the two sides inked a memorandum of agreement toward assembling the EVs at Proton facilities in Malaysia.

Since Geely owns 49.9% of Proton, these moves suggest the Chinese automaker aims to expand its EV presence throughout Southeast Asia.

Proton was founded in 1983 under then-Malaysian Prime Minister Mahathir Mohamad, who sought to establish a national car company. Mitsubishi Motors was an initial investor, but the capital relationship was dissolved in 2004 following poor earnings.

In 2012, Malaysian conglomerate DRB-Hicom took over Proton. After Geely bought its stake in Proton in 2017, DRB’s ownership dropped to its current 50.1%.

Geely provides Proton management and technical support. Proton went on to release popular sport utility vehicles, lifting its domestic market share to 20% from the teens.

DRB’s automotive segment, driven mainly by Proton, earned 375 million ringgit ($78.7 million) in operating profit last year, according to financial data firm Refinitiv, nearly quadruple the black ink in 2021. But Proton has been slow to establish an EV business. It was only this May that the company released its first hybrid vehicle. Proton is expected to roll out a fully electric vehicle under its own brand in 2025.

Formally known as Zhejiang Geely Holding Group, Geely sells EVs in China under multiple brands, including Zeekr. Geely also sells EVs through group company Volvo Cars and the luxury brand Polestar.

Until recently, Geely’s movement in Asia’s EV market outside of China has been muted. But last month, Geely Chairman Li Shufu expressed enthusiasm for the Southeast Asian market.

“We’re confident in the market prospects of Southeast Asian countries, and we’ll jointly build regional economic integration through high-quality development,” said the chairman, who is also known as Eric Li.

Geely’s goal is to nurture Proton into one of the top three auto brands in Southeast Asia. EVs will be indispensable to that objective, and the group is working on training 5,000 people in the new energy vehicle sector within five years.

This July, Malaysian Prime Minister Anwar Ibrahim said that Geely will invest around $10 billion in Malaysia’s main automaking hub of Tanjung Malim, in the state of Perak. Geely said it will transform Tanjung Malim into an “automotive high-tech valley.”

The hub will be home to facilities for research and development as well as for manufacturing. Chinese and Malaysian suppliers will be encouraged to set up shop in the area under the vision of creating one of the leading auto industry centers in Southeast Asia.

Geely’s strategy aligns with the Malaysian government’s industrial agenda. In September, the state unveiled the New Industrial Master Plan 2030 that includes EVs as a priority. By that year, electrified vehicles will account for 15% of Malaysia’s total sales volume, and the country aims for exports as well.

Proton is considering building an assembly plant in Thailand, Thai Prime Minister Srettha Thavisin said last month. It appears that Proton is looking to make use of the supply chain in Thailand, Southeast Asia’s largest producer of automobiles, while developing Malaysia’s EV industry.

In the past, Malaysia’s government focused on supporting national car brands with incentives, resulting in the homegrown industry focused on the domestic market.

Proton and leading national carmaker Perodua controlled a combined domestic market share of roughly 60%. But Proton only exported approximately 4% of the 141,432 vehicles sold last year.

At 33 million people, Malaysia is relatively small, so growth of the national auto industry will require overseas expansion. That reality meshes with Geely’s ambitions to widen its footprint in Southeast Asia.

Elsewhere, the government is pushing Perodua to shift to EVs through a merger of two domestic conglomerates.

However, Geely and Malaysia will face competition against other Chinese EV manufacturers that have sights on Southeast Asia. BYD started building an EV assembly plant in Thailand that is due to begin operations next year.

The SAIC Motor group and Great Wall Motor are bolstering sales and manufacturing in Thailand as well. Last year, the joint venture SAIC-GM-Wuling Automobile started making EVs in Indonesia, as did South Korean rival Hyundai Motor.

“Certainly this would be a challenge for Geely,” said Akshay Prasad, senior engagement manager at U.S.-based consultancy Arthur D. Little.

“I don’t think there is any first-mover advantage yet,” Prasad added.

On the other hand, Japanese automakers are feeling the heat from the Chinese offensive in Southeast Asia’s EV space. The competition is already wearing away at Japan’s overwhelming regional share among gasoline vehicles.

“Geely is an unsettling presence because of its deep pockets,” said a senior officer at a large Japanese auto company in Malaysia.

source: Nikkei Asia