Proton to drive into India very cautiously

Chennai: Malaysia''''s state owned car maker Proton Holdings Berhad has been contemplating entering India''''s growing car market.

According to officials, Proton is open to exploring options like a joint venture with an Indian company or even contract manufacturing for an Indian auto maker as the Malaysian company considers driving solo in to the country a risky proposition.

With its own home turf and neighbouring markets getting saturated, it regards India and China as potentially important growth markets.

Early this year the company adopted contract manufacturing for a Chinese company that sells proton''''s cars under its own brand. Proton plans to sell around 30,000 cars this way in China.

According to some Proton executives currently in India as part of a Malaysian trade delegation, Proton is open to a similar arrangement with an Indian company as it would help Proton remain in the black. Moreover, proton has a spare 20-per cent capacity at its Malaysian plants, which it could utilise for such an arrangement.

However, the RM 4911.8-million revenue Malaysian company has to face some bumps as its product portfolio does not have a small car to compete with Maruti, Tata Motors, Hyundai Motors or General Motors, in order to establish a presence in the mass, small car segment.

That leaves it with the option to enter the mid-size segment, which in India is already crowded with several global brands in the price band Rs10 lakh upwards.

Both options would require a deep pocket to stay in the market. It has to be seen which Indian company would be willing to put its money to market Proton-made cars in India, especially in view of the tax component for imports. If the Indian company imports these as completely built unit (CBU) then the tax component would make the end price uncompetitive.

On the other hand importing in semi knocked down (SKD) kits would involve setting up an assembly line at a sizeable investment, unless Proton can tie-up with an existing manufacturer to roll out its cars.

According to Proton officials, the company has earmarked some funds for for investment in India.

Proton recently turned the corner having posted a profit in the recent quarter after a continuous loss in the preceding five quarters. For the year ended 31st March 2007 the company had posted a loss of RM 589.5 million.

Meanwhile the company is looking at sourcing components from India so as to bring down production costs back home. It is also seriously looking at rationalisation and consolidation of its vendor base that also includes commonality of components for its various models to cut costs.