Malaysia’s struggling national carmaker Proton inked an agreement Friday to help Indonesia study the possibility of developing and manufacturing its own national car.
The signing of the memorandum of understanding with PT Adiperkasa Citra Lestari was witnessed by visiting Indonesian President Joko Widodo and Malaysian Prime Minister Najib Razak.
Proton said in a statement that the two companies will conduct a feasibility study and explore areas of cooperation in the Indonesian car project. If the study shows the project is feasible, the companies will sign a joint venture agreement, it said.
Proton Chairman Mahathir Mohamad, who is a former Malaysia prime minister, said the study is expected to be completed in six months. He said there is great potential in the Indonesian market, with auto sales exceeding one million vehicles last year and annual sales of four million vehicles conceivable in the long run.
“We would like to make use of the joint venture with Indonesia to expand and become an ASEAN car,” he said, referring to the 10-member Association of Southeast Asian Nations.
The concept of an ASEAN car will involve investment by other regional countries and see manufacturing facilities
PT Adiperkasa’s CEO Abdullah Mahmud Hendropriyono said it will be a major development for Indonesia, helping to spur its automotive industry and increase the country’s technical know-how. PT Adiperkasa is a private company backed by the government, Mahathir said.
Because of Indonesia’s huge market, the proposed project could give a lifeline to loss-making Proton, which is struggling to boost sales after its fortunes dwindled due to greater foreign competition.
Once the king of the road in Malaysia, Proton’s share of domestic car sales has plunged from about 50% a decade ago to about 21% last year. Proton’s exports have been lackluster, with sales hindered by perceptions of poor quality and bland models.
Mahathir, who founded Proton in the early 1980s during his rule, said Proton would have to invest in the Indonesian project and may not make money at first but it will benefit once the car is accepted and sales pick up in Indonesia.
He said Proton will study the Indonesian market to see if it can modify any of its current models for assembly there, before delving into designing and manufacturing a truly Indonesian car.
If the project is successful, he said there should be some form of tariff protection to enable Indonesia’s auto industry to grow.
Countries such as Japan and South Korea protect their auto industry and “we should adopt some of their strategies,” Mahathir said. “It will not be unusual for Malaysia and Indonesia to consider protecting an infant baby,” he said.
Widodo, who arrived in Malaysia recently for a three-day official visit, earlier toured Proton’s manufacturing plant and was impressed with Proton’s expertise, Mahathir said.