Malaysia's Proton Should Pull Up Its Socks For Era Of ...

October 02, 2009 15:35 PM

Malaysia's Proton Should Pull Up Its Socks For Era Of Consolidation And Competition

By: Ramjit

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By Manik Mehta

FRANKFURT, Oct 2 (Bernama) -- If signs at the just-concluded International Motor Exhibition of Frankfurt, popularly known by German acronym "IAA", are any indication, Malaysia carmaker Proton needs to pull up its socks and brace for what is described as the onset of an "era of consolidation and competition."

There were predictions at the IAA, the world�s biggest automobile exhibition, seen as a barometer for trends and developments in the automobile industry and global economic health, that consolidation will intensify in the automobile industry and shrink the number of major carmakers to about 10 or 11 automakers instead of 20 at present.

Management consultancy, Deloitte, predicts that by 2020 there will be only 10 carmakers, accounting for some 90 per cent of the world market, down from 18 or 19 per cent at present.

Deloitte expert Hans Rudolf Rohm said consolidation in the car industry would increase transnational cooperation in future.

The global automobile market will grow in coming years from 50 to 70 million cars.

Indeed, Deloitte predicts that consumers will prefer small and energy-efficient cars, with most production shifting to Asia.

What does this portend for Proton which made news in German automobile circles following its aborted tie-up with Volkswagen, Germany's biggest carmaker?

Though it is anybody's guess how Proton will fare in the years ahead, given the shrinking world markets and cash-strapped consumers, Proton will be advised to prepare itself for the onslaught of consolidation; this will mean it could become a prized acquisition object or end in a tie-up with a foreign car manufacturer.

"Devour or be devoured!" was the catchphrase widely heard at the Frankfurt exhibition.

The way out of the cul-de-sac, as many automakers in the future will find themselves in, will lie in augmenting productivity, improving quality and designs, producing fuel-efficient cars and keeping prices as low as possible.

A favourite mantra, though not necessarily a panacea, for many carmakers at Frankfurt was Asia, by which most of them meant China and India or Chindia, to use the hybrid term in vogue.

But it was India, with its well-developed automobile manufacturing base and the sensationally low-priced hi-tech car called "Nano" that stole the show at Frankfurt .

On penetrating the gigantic India market, Proton could take a cue from Volkswagen. which has joined forces with Japanese carmaker, Suzuki which, in turn, has a tie-up with India�s Maruti Group.

VW already has a strong foothold in India and South Asia through Suzuki.

Indian carmakers at the Frankfurt event appeared confident and bullish, buoyed by the unprecedented attention they received at the exhibition.

"By 2016, we want to become the leading automobile nation in Asia," averred Parwan Goenka, president of the Society of Indian Automobile Manufacturers and the top man at India�s fourth largest automobile group "Mahindra".

Goenka predicted that India�s present 50 million strong prosperous middle class with potential to buy luxury cars will further grow in the coming decade.

The turnover volume in India's car market in the coming seven years will rise from US$36 billion to US$115 billion, Goenka claimed.

India, whose mode of transportation in antiquated cars in the past was contemptuously referred to by German industrial circles as the "world�s bullock cart" is now being aggressively courted by German automakers.

Forced by their own financial problems and shrinking demand in the traditional markets of Europe, Japan and the US, German carmakers are desperate to tap the new markets of the so-called BRIC (Brazil, Russia, India and China) countries.

But India clearly stands out as an attractive manufacturing base with a large and unlimited pool of highly-qualified and English-speaking engineers, scientists and other experts, coupled with a strong, cash-rich middle-class base whose voracious appetite for luxury products, including foreign brand-name cars, exudes considerable pull for German car manufacturers.

As Germany's car industry continues to bleed with declining sales and revenue, more and more German carmakers feel that one "simply cannot bypass the future market India", as the president of the German Automobile Association, Matthias Wissmann, a former minister in former Chancellor Helmut Kohl's government, said at the IAA.

Juggling with figures, Wissmann said at the IAA's India Day seminar that in Germany one out of two Germans drives a car. In India, the ratio is 11 cars to a thousand people.

Wissmann even called for the creation of a free trade zone between the European Union (EU) and India.

Sudhir Vyas, India's Berlin-based Ambassador to Germany, highlighted India's "ambitious plans" for its industry. He said India has plans to move up the ladder from its present position as the world�s 11th largest automobile producer to seventh position by 2016.

Wilfried Aulbur, managing director of Mercedes-Benz India, maintained that India had already "surmounted the worst" in the current global financial and economic crisis.

India,s prosperity and, in effect, the potential for purchasing upper-value cars would further increase, he said.

Studies such as the one prepared by the German consultancy firm "Management Engineers" suggest that the small-car market is the world's second fastest growing market after China.

Management Engineers said the annual growth rate of small cars was between seven and eight cars per 1,000 residents in India.

Small cars currently account for 61 per cent of India's automobile market while vans and sport utility vehicles make up 13 per cent.

But many German experts, familiar with India's woefully inadequate and antiquated infrastructure, complained that India urgently needs to build modern roads and highways to ensure safe driving by high-powered modern cars.

"India's infrastructure needs to be urgently upgraded and modernised. The roads are a pathetic sight and pose a threat for safe driving," remarked Arnold Ratzinger, an automobile consultant engineer who has visited several Asian countries, and runs a consultancy near Stuttgart.

"By comparison, Malaysia's infrastructure is excellent, with a well-developed network of roads and highways as compared with the best in the world," Ratzinger said.

-- BERNAMA

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