Shares in carmarker Proton sank 11.7 percent yesterday as analysts warned its future remained cloudy after Malaysia ditched alliance talks with Germany's Volkswagen (VW).
At 12:30am Proton shares fell 58 sen to 4.36 ringgit (US$1.29), while the overall Kuala Lumpur Composite Index fell 0.5 percent or 6.94 points at 1,364.76.
Analysts and industry officials said there were many outstanding thorny issues that Proton had to grapple with since it lacked economics of scale in its production along with fierce competition from foreign carmakers.
ANALYSTS SHOCKED
"We are taken aback by the government's decision to end talks with Volkswagen and let Proton operate without a strategic partner," said Sharifah Farah, an analyst with CIMB Research.
"We believe there is still a question mark over Proton's long-term viability given further liberalization of the local auto industry, the influx of new competitive models and competition from foreign carmakers," she said.
Sharifah said it was unlikely that VW would restart negotiations with Proton.
"We see no reason for why Volkswagen would be interested in restarting talks at a later stage. Proton needs Volkswagen, rather than the reverse," she said.
Aishah Ahmad, president of the Malaysian Automotive Association said the government decision had "nothing to do" with controversial affirmative policies designed to narrow the wealth gap between the Chinese and Malays.
"Volkswagen was only looking for a 20 percent equity. They were not asking for a majority stake," she said.
On Tuesday Malaysia's state investment arm Khazanah Nasional, which controls Proton, said it had discontinued negotiations with VW.
The German car maker said it and the Malaysian government had for the time being decided "to shelve their joint talks" about the alliance.
The talks began in October 2004 aiming at revitalizing Proton, which experts say has suffered from stiff competition, a lack of new models and a reputation for poor quality.
Malaysia's second finance minister Nor Mohamed Yakcop said on Tuesday that Proton's fortunes have turned around in recent months.
Sales of Proton cars have improved, especially the Persona model, which chalked up bookings of about 22,000 units at the end of last month after it was launched in mid-August, Nor Mohamed said.
Kelvin Goh, analyst at CIMB Investment Bank said Proton needs a foreign partner to remain competitive in the long-term.
"We were taken aback by this decision as we view the recent improvement in sales as a short-term rebound," he said.
Proton's longer term prospects remain murky as it lacks branding and the technological know-how, said Goh, who described the news as a "disappointing development."
PROTON STRUGGLING
Aishah said Proton lacks economics of scale and needs to boost sales and production.
Proton's production for this year was expected to hit only 116,000 units way off its economics of scale figure of 300,000 units, she said.
"They have to boost their production. It will cut cost and allow them to sell Proton cars at competitive prices," Aishah said.
Meanwhile, the German business daily Handelsblatt reported yesterday that VW was looking for a new Asian partner and is focusing on Indonesia and Thailand.
The paper quoted VW sources as saying that research teams from the car giant were ready to begin looking at possible partners.
A VW spokesman in Frankfurt on Tuesday said that the group was now looking for "new commitments" in Southeast Asia.
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source