PROTON Holdings Berhad (PROTON) and Zhejiang Geely Holding Group (Geely) today signed a Heads of Agreement to set up a joint-venture that will pave the way for PROTON to assemble and market their cars in China. Both companies take up equal equity in the yet- to-be-named joint-venture company (JVC).

In an announcement today, DRB-HICOM Berhad (DRB-HICOM) said the venture includes the set-up of a production facility in China which will assemble vehicles, and the development of a network of dealers to market the PROTON range in China.

The portfolio of cars for China will primarily come from existing Geely platforms, although the external design of the vehicles will be undertaken by PROTON themselves. However, the agreement also provides for existing PROTON platforms that are found suitable to be developed into models for the Chinese market.

DRB-HICOM Group Managing Director, Dato’ Sri Syed Faisal Albar says, Geely’s entry as a strategic partner to PROTON has paved an easier route for PROTON’s entry into the lucrative Chinese market. He added that existing PROTON component vendors that have quality and a competitive edge may also be considered as suppliers for the JV company. This should sit well with the Government of Malaysia that has often prodded Malaysian component makers to venture into the Chinese market. Prime Minister Tun Mahathir Mohamad had lamented previously the lack of Malaysian car exports into regional markets, despite Japanese, Korean and Chinese brands making their way onto Malaysian shores.

China’s passenger car sales have grown tremendously over the last 10 years. In 2008, 6.76 million passenger cars were sold in China, but it has grown to over 24 million units in 2017. Geely is a clear leader in this, being the first privately-owned Chinese carmaker to sell over 1 million units domestically in a calendar year. In 2017, it sold more than 1.24 million units, carving out a 5.06% market share. In the first six months of 2018, Geely moved an average of over 125,000 units of their models a month, with the Boyue SUV passing the 20,000 mark every month except in January, when more than 30,000 Boyue SUVs were sold. The localised version of the SUV is set to be launched in Malaysia in the final quarter of 2018 as PROTON’s first-ever SUV.

Both parties target to incorporate the JV within the first half of 2019, subject to obtaining all regulatory approvals