Lotus Evora 410 MY16 Yellow Rear 3 4 0scl
Michael Taylor24 May 2017
NEWS

Geely to take over Proton, Lotus

Chinese car-making giant set to snap up Malaysia’s ailing Proton

Surging Chinese car-maker Geely is set to take over Proton and Lotus parent company DRB-Hicom after outlasting France’s PSA Peugeot-Citroen in a bidding duel.

The takeover, which sources insist will be announced this week, will deliver Proton and sports car brand Lotus to Geely, to go along with its Swedish brand, Volvo, its recently announced Lynk&Co brand and the London Taxi Company.

DRB-Hicom asked Malaysia’s stock exchange to halt its trading yesterday, pending a major announcement, believed to be the acquisition of 51 per cent of the ailing concern by the Zhejiang Geely Holding Group.

Geely’s bidding battle with the Dongfeng-controlled PSA (the parent company of Peugeot and Citroen) saw DRB-Hicom shares rise to their highest point in two months, while Geely shares surged to an all-time high on the Hong Kong stock exchange.

The highest-performing stock on the Hang Seng index, with 250 per cent growth in the last 12 months, Geely took over Volvo from Ford in 2010 for $US1.5 billion.

It hasn’t been a smooth process, with Geely pulling out of the bidding process as recently as mid-April, accusing DRB-Hicom of dithering over the selection process.

“They keep changing, today it’s this, tomorrow it’s that,” said Geely chairman Li Shufu said in April. “They haven’t decided what they want.”

The glamour part of the deal gives Geely full control of Lotus Cars, the sports car operation based in Hethel, near Norwich, England, that has racked up losses for decades and has essentially been in a holding pattern since controversial former boss, Dany Bahar, was sacked in 2012.

However, sources have admitted there are other, more significant reasons why the deal makes sense for Geely.

The most important of those is access to Proton’s Tanjung Malim plant, which is barely utilised today but has a capacity of 150,000 cars a year. That plant will give Geely its first right-hand drive production capacity (outside Volvo’s Swedish operations), allowing it to access 84 countries markets that are barred to it today.

The first part of the deal would be to transfer right-hand drive production of the Lynk&Co 01 SUV to Tanjung Malim so the car could be sold in countries like Australia, the UK, Japan and South Africa.

Due to be launched in China late this year, the 01 will also be launched in Europe midway through 2018 and three other models are planned to follow by 2021.

As Malaysia is part of a free-trade ASEAN bloc, it would also allow Geely to export cars tax free to Brunei, Singapore, Indonesia, The Philippines, Thailand, Vietnam, Laos, Cambodia and Vietnam.

The Lotus takeover brings a surprising benefit for Geely, too. It is pursuing a plastic body-on-aluminium architecture for its London Taxi program, and nobody has more experience at bonding the two materials together than Lotus, which has used the technology effectively for the Elise and Elise-based sports cars for 20 years.

What Geely plans to do with the ailing Proton brand remains a mystery, even to senior Geely insiders, who believed the brand’s future was far from locked in. If it survives at all, it would be as the Group’s budget brand.

Its domestic market share fell from 15.3 per cent in 2015 to just 12.5 per cent in 2016, while total production fell 29 per cent last year to just 72,300 cars.

Geely itself has no such concerns, with its sales growing 63.5 per cent from the first quarter of 2016 to the same period this year, according to JATO Dynamics.

The Geely Group now ranks 13th in the world with 410,830 sales in the first quarter of the year, placing it just behind Daimler and BMW and ahead of Mazda.

It sold 330,000 cars a year before it swallowed up Volvo (which was then selling roughly the same number of cars). Combined into a Group, the two brands moved 1.3 million cars last year and it is aiming for 2.8 million by 2020, with 800,000 of those from Sweden.

Besides its nine Chinese plants, Geely also has factories in Belgium, Sweden and England and builds around 20 different models. It has design studios in Gothenburg, Sweden, Shanghai, Pasadena in California and Barcelona, Spain, employing around 500 designers.

It’s also the biggest of the Chinese outfits, outranking 15th-placed Changan (389,305 cars sold in the first quarter of the year), Great Wall in 19th and GAC in 20th.

Interestingly, while PSA ranks 10th with 682,174 cars sold in the first quarter, just ahead of Daimler and behind Suzuki in size, it is controlled by China’s Dongfeng, which sold only 239,818 cars over the same period and is the 18th biggest car-maker in the world.

But PSA and Dongfeng are also struggling to swallow the recent takeover of General Motors’ German operation, Opel, and PSA itself lost five per cent in sales so far this year.

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Written byMichael Taylor
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