CASE STUDY

Protons Contract Manufacturing in India

On 28 December 2010, Tun Dr Mahathir Mohamad the advisor of national car maker, Proton (Perusahaan Otomobil Nasional Sdn. Bhd) said that Proton should leverage on Indias low cost production to foray into the burgeoning automobile market.

Indias automobile sector is gradually attracting world class players, all capitalizing on Indias insatiable demand for foreign models and cheaper production costs.

Now, there is scope for Proton to come here because we are not tied to any other (foreign) companies. Proton is free and can come here, said Tun Dr Mahathir.

It is a sunrise sector, with Indias passenger vehicles segments in 2010 (April August) seeing a 33.88% growth compared to the same period in 2009. Its passenger car and commercial vehicle production industry is the worlds seventh largest, with an annual output of 2.6 million units in 2009.

In Asia, India takes pride in being the fourth largest exporter of passenger cars, after Japan, South Korea and Thailand. In the past years, Proton attempted to enter the competitive India market, trying to marry with local car producers to expand its operations in the South Asia region, but deals failed to mature.

Tun Dr Mahathir said that Proton is now busy trying to develop hybrid and electric cars.

When it has achieved some degree of competence, it may want to work in India. If we invest here, we can actually produce the cars here, firstly through assembly and subsequently by manufacturing, once we achieve the volume. Proton, I think, can compete with other cars because it can take advantage of the lower cost of (production) in India, he added.

A week after Tun Dr Mahathir gave his advice, Protons Managing Director Datuk Syed Zainal Abidin Syed Mohamed Tahir responded by saying that Proton intended to finalize discussions with a global original equipment manufacturer (OEM) within the same quarter of that year to set up contract assembly manufacturing operations in India.

We know India is an important market, but to be successful, we need to work with a local OEM (in India). We have identified a company and have had many discussion, said Datuk Syed Zainal Abidin. He said Proton was hoping to engage in contract assembly manufacturing via a joint venture effort with the OEM.

Source: Adapted From Proton Contract Assembly Plant In India, Replacement for Perdana in Msia?, 2011 and Mahathir Tells Proton To Look At India, 2010.

Case study questions

1. What has happen at last, did the plan of them success or not, did they manufacture in India? Explain more on this question.
2. What are the benefit for them to manufacturing in India? Explain more about this.
3. What is your understanding, suggestion and conclusion? Explain.