Published on Bernama. com on November 14, 2003

Special report on Proton distributors

By Lena Liew
DOHA (Qatar) Nov 9 (Bernama): Proton distributors in Qatar and the United Arab Emirates (UAE) are struggling to market their stock of Proton cars, while those in Saudi Arabia, Bahrain and Oman have had their distributorship terminated following poor sales and disputes.

The only dealership in the six Arabian Gulf Cooperation Council (GCC) countries that is doing well is the one in Kuwait.

When interviewed by Bernama, the Proton distributors in Doha and Dubai spoke at length about the challenges they faced trying to "sell" what they said were overpriced, outdated models which had poor resale value in a mid-range family sedan market saturated with dozens of competitively priced Japanese, Korean, American and Europeans brands.

Not surprisingly, the Japanese and Korean brands hold sway with their competitive pricing, reliability, good aftersales service, easily available parts and - most significantly - resale value of at least 60% after three years.

"We are struggling against the Toyota Corolla, Nissan Sunny and Mitsubishi Lancer. Their pricing is very competitive. Secondly, you look at resale value in two years' time against the Proton, and you don't have to think any further," said John Johnson, the general manager of Doha Motors and Trading Co's automobile division.

He said that the company has had to cut its profit margin, which is already a quarter that of Toyota and Nissan, to try and shift any Proton product.

Doha Motors sold a total of 138 Proton Wiras, Wajas and Satria GTis in the year ending March 2003. The company, part of a Qatari trading group, started importing Proton cars five years ago.

"It's very difficult to market an outdated product at such a high price. We are still trying to sell the 2001 model when everyone else has their 2004 models on the streets already. When we say 'it's Mitsubishi technology', the customer will say 'well, we might as well buy a genuine Mitsubishi Lancer'," Johnson said.

"I can't seem to get Proton (HQ) to understand that the only way we can gain market share is to buy it with pricing ... to make up for the poor resale value."

In Qatar, the 2001 model 1,500cc Proton Wira is selling for between QR31,000 (US$8,490 - manual transmission) and QR35,000 (US$9,590 - auto transmission). A 1,600cc Proton Waja sells for a minimum of QR43,000 (US$11,780).

"Second-hand car for sale" advertisements in the local newspapers have offered two-year-old Proton Wiras at half the original price. A classified ad offering a four-year-old Proton Wira at QR12,000 (US$3,280) kept appearing for over a week.

In contrast, a 2003 model 1,600cc Nissan Sunny (manual) sells for QR38,000 (US$10,410), and a Mitsubishi Lancer of the same model year and capacity QR42,000 (US$11,500).

Both would still be worth at least 70 per cent the original price (QR27,000, or US$7,390) in two years' time.

As of the third quarter this year, the Japanese and Korean distributors here were already advertising their 2004 models.

In the UAE, a 1,500cc Proton Wira (auto) is priced at Dh29,000 (US$7,900); a two-year-old 1,500cc Proton Wira in good condition could fetch no more than half the original price (around Dh14,680, or US$4,000).

"We are trying our best, but it's a really tough fight," said Satish Menon, marketing manager of National Auto, the Dubai-based Proton distributor.

"The poor resale value and overwhelming competition are the major drawbacks. The Wira is otherwise a very good product that runs well trouble-free with minimum maintenance."

"Our market for Proton cars is the middle-class Asian expatriate family, for whom resale value is a major factor. We tried marketing the Wira to taxi drivers but the price is simply not competitive when compared with the Japanese brands, which have been in the market here much longer," Menon said, referring to the entry of Proton cars into the UAE market in 1998.

According to Menon, his company is selling at most 15 units each month.

"Our main business comes from General Motors; we are selling also Fiat, Lancia, Ssangyong," he said, adding that no distributor in the Gulf could survive on selling Proton cars alone.

Doha Motors for instance sells also Taiwan-made commercial vehicles from the China Motor Company.

The Saudi dealership in Jeddah was reportedly displaying Protons Wiras alongside Mitsibishi Lancers, and according to unconfirmed reports, flyers for Mitsubishi sedans could be seen on the token Proton Wira display model.

The MATRADE office in Jeddah said that the Saudi dealership imported its first and last batch of 30 Proton Wiras in 1997 and Proton terminated the company's distributorship in 2001.

The Malaysian embassy in Bahrain and Muscat and Oman confirmed that their local Proton dealership was no longer selling Proton cars.

"Just before I assumed my posting in September, I visited the Proton headquarters in Shah Alam and was told that they have terminated the distributorship and are in the process of finding a new distributor, not necessarily based in Bahrain," said Naimun Ashakli Mohamed, Malaysia's first ambassador to Bahrain.

According to the Malaysian embassy in the Omani capital Muscat, brand-new Korean cars with a longer track record were selling for half the price of Proton Wiras, which cost around Oman Riyals 4,000 (US$10,000). For further comparison, the latest 1,700cc Honda Civic was selling for just Oman Riyals 4,900.

Despite repeated attempts, the former Proton distributors in Oman, Saudi Arabia and Bahrain could not be reached for comment.

Both Menon and Johnson stressed the need for Proton to do more in terms of promotion in the UAE and Qatar, by chipping in with a discount on its distributor's price to enable the distributor to promote its products without making a loss.

"Us agencies can only do so much. Once or twice, maybe ... but how many times can we absorb a loss of thousands of dirhams just to promote the product?" Menon asked, citing retail business lucky draws and scratch-and-win promotions which are the trend in the UAE.

Johnson of Doha Motors expressed similar views, saying that Doha Motors was doing everything possible short of making a loss.

For example, the company is offering free service up to 15,000km, compared to the norm here of 5,000km.

"We can't afford to offer significant discounts, because our profit margins are already so low. As much as we are prepared to further reduce our profit margin to offer Proton cars to supermarkets here as prizes for their lucky draws, Proton needs to play its part as well," Johnson explained.

Never mind no support, he said, the International Business Development (IBD) department in Shah Alam does not even reply to phone calls, faxes or e-mails without vigorous follow-ups and reminders from his side. He cited several frustrating cases of poor professionalism and lackadaisical attitudes at the IBD.

"I attended the Proton Arena launch in Putrajaya a year ago and brought back this brochure. Would you believe it, after repeated queries, only as of two days ago (November 1) have we got the pricing, which we are disputing!" Johnson said.

According to Proton Cars Australia, a direct Proton subsidiary, the Proton Arena is selling well in Australia - thanks to the leisure-loving culture of the Australians.

In Qatar, pick-ups are commonly double cab and used for commercial purposes, not leisure. For leisure, the market is the Arabs, who go for sport utility vehicles 2,800cc and above. Number one is the Toyota Landcruiser.

Also, pick-ups in the Gulf market start at 2,200cc, whereas the Arena is only 1,500cc with a single cab. Hence there remains a doubt whether the Arena will find its place in Qatar and the other GCC countries.

Although Qatar levies an import tax of only five per cent, Johnson spoke of high overheads like the provision of accommodation allowances, transport for staff, 30 days paid annual leave and annual return air tickets for not only the staff but also their immediate family members.

These employment benefits are the norm in the Arabian Gulf where staff at all levels are foreigners, predominantly from South Asia.

"It's hard to convince Proton because of the domestic culture and scenario, and they have so little experience (competing globally)," said Johnson.

Johnson spent 13 years working in the upper rungs of the automotive industry in Malaysia and comes with over 30 years' experience in the industry.

He is not giving up yet though, not least because he believes Proton cars are good products.

"We are fairly forcefully discussing a future with Proton ... I met with the Deputy CEO and some officials from the International Business Development division just last month in Shah Alam. I am now in the process of putting together a new business plan for Proton."

Johnson said a highlight of his latest trip to Malaysia was a visit to the new Proton plant in Tanjung Malim.

"I was very impressed. I found the Replacement Wira Model (RMW) which is yet to be released very exciting. It has a very attractive shape, very forward-thinking design," he said. "I'm looking forward to it."

In its annual report released in the middle of September, Proton had said that "sales to the Middle East region grew 43% and accounted for more than 50% of total exported sales for the year, suggesting that much exciting possibilities exist in these markets".

On October 9, Starbiz had reported that Proton cars are currently sold in 17 OIC member countries: Turkey, Bangladesh, Brunei, Maldives, Indonesia, Iran, Iraq, the United Arab Emirates, Qatar, Kuwait, Oman, Saudi Arabia, Syria, Jordan, Bahrain, Lebanon and Egypt.

The oil and gas-rich GCC countries are Kuwait, Saudi Arabia, Qatar, Bahrain, UAE and Oman.

The "brotherhood" is home to the world's highest per capita income levels and holds nearly 45 per cent of the world's extractable oil wealth along with the world's largest offshore natural gas field in Qatar.

Recent reports have predicted that the GCC will record a six to seven per cent increase in their combined gross domestic product (GDP), far higher than the expected global average of two per cent.
 
Related article: Kuwait distributor a star performer