MARKET SUMMARY

Proton is the Malaysian national automobile manufacturer (Malay acronym for

Perusahaan OTOmobil Nasional, 'National Automobile Enterprise'), which was established

in 1983 under the direction of the former Prime Minister, Dr. Mahathir Mohamad. Proton

Holdings Berhad, the holding company, is listed on the Bursa Malaysia.

Based on technology and parts from Mitsubishi Motors, production of the first model,

the Proton Saga began in September 1985 at its first manufacturing plant in Shah Alam,

Selangor. Initially the components of the car were entirely manufactured by Mitsubishi but

slowly local parts were being used as technologies were transferred and skills were gained.

The 100,000th Proton Saga was produced in January 1989.

Until the end of the 1990s, the car's logo featured the crest from Malaysia's coat of

arms, featuring a crescent and a fourteen-pointed star. The new Proton logo features a

stylized tiger head. In 1993, a model called Proton Wira was introduced based on the

Mitsubishi Lancer/Colt. More than 220,000 units were sold between 1996 and 1998. Proton

Perdana, based on the Mitsubishi Galant/Eterna, was first produced in 1995, intended for

higher end market. The Proton Waja (Proton Impian in UK), which launched early 2001, is

the first car model designed internally by Proton.

By 2002 Proton held a market share of over 60% in Malaysia, which was reduced to

barely 30% by 2005 and is expected to reduce further in 2008 when AFTA mandates

reduce import tariffs to a maximum of 5%. (See "Trivia" section for update on tariff

implementation)

With the acquisition of Lotus technologies in 1996 from ACBN Holdings (a company

owned by the owner of Bugatti), Proton has gained an additional source of engineering and

automotive expertise. This led to the production of Proton Gen-2 which was code name

Wira Replacement Model (WRM) before the launch. The Gen-2 is the first of cars to be

manufactured and assembled at the new manufacturing plant in Tanjung Malim, Perak

which is part of Proton City development project. The plant was opened in 2004.

On 8 June 2005 Proton introduced the second model to be manufactured in Tanjung

Malim, the 1,200 cc 5-door supermini, the Proton Savvy. Both the Gen-2 and Savvy, were

models that MG Rover was looking to rebadged when the British firm entered into

collaboration talks with Proton. However these joint-venture talks were unsuccessful and

MG Rover subsequently collapsed.

In 2007, Proton launch its new sedan as replacement version for Wira Sedan but with

new name, Persona. The new Proton Saga replacement model (codename Proton BLM)

was launched on 18 January 2008. The new Saga is based on the Savvy platform, but using

Campro 1.3L instead of Renault engine. It was announced on August 8, 2008 that Proton is

developing a new, fuel-efficient hybrid car to beat rising costs and address environmental

concerns. Prime Minister Abdullah Ahmad Badawi told reporters that he had already test-

driven the car and urged the company to continue researching energy-saving technologies.

As of 3 August 2008, Proton has produced 3 million cars since 1985, where the 3

millionth cars is a second-generation Saga.

TARGET MARKET

Proton has exports cars to the United Kingdom, South Africa, and Australia and the

company is aggressively marketing its cars in several other countries including the Middle

East. Besides that, Proton cars has also been exporting a small volume of cars to Singapore,

Brunei, Indonesia, Nepal, Sri Lanka, Pakistan, Bangladesh, Taiwan , Cyprus and Mauritius.

14,706 Proton cars were exported in 2006. Recently Proton returned to Guangdong, China,

where it did business in the past but withdrew after having poor sales record. In July 2007,

Proton signed an agreement with Youngman Automobile Group Ltd. Co., paving the way

for the national carmaker to offer its products and services in China. Under the

agreements,Youngman will import 30,000 Gen.2 CBU (completely built-up) units and

resell them under its own EuropeStar brand and eventually develop a new range of Made-

in-China cars with the engineering services provided through Proton's Lotus. Proton is

expected to ship 1500 cars a month for 20 months starting December 2007 to fulfill the

order.

Proton began its exports from Malaysia to other right hand drive markets like New

Zealand in the late 1980s to fulfill consumers needs based on culture situation, but its

success was mostly limited to the United Kingdom where it entered the market, along with

Ireland, in 1989. They advertised there with the slogan Japanese Technology, Malaysian

Style. Proton cars proved popular among budget-oriented motorists, and like Japanese and

South Korean models before them, led to the demise of manufacturers such as the Soviet

Lada and ex-Yugoslavian (now Serbia) Zastava. By the 1990s, Proton had withdrawn from

the New Zealand market after offering only the Saga four-door and Persona five-door

models. The company also exited the Irish market in the early 1990s, following limited

success in that country. The Persona and Natura models were sold in Chile briefly during

the late nineties by a local Nissan importer, but few were sold and the venture ended after

two years. Proton sales seem to be slowly declining in the United Kingdom with 2008 sales

at 1518 (0.07% share of the market), compared to 2752 in 2002. These figures are

insignificant compared to 2008 UK sales of 28,036 for Korea's Hyundai and 29,397 for

Spain's SEAT.

Proton also exports cars to Singapore and Australia, and now produces models in left-

hand drive, for export to continental Europe. An entry into the US market was considered

by Malcolm Bricklin following Hyundai's successful launch in the mid 1980s. However,

exports to the US never materialized, as the cars required hundreds of changes to meet

American safety standards in order to secure coverage from auto insurers and satisfy

legislative requirements. Proton export models still do not comply to all environmental

standards such as emission limits.

The model that Malaysia has followed with the formation of Proton may be used as a

case study for rent seeking as tariffs on imported cars rose almost immediately following

the formation of Proton. Also AFTA agreements on relaxing entries into the ASEAN

market space had exemptions specifically for Proton. The Malaysian government gained a

three-year exemption for Proton from 2002 to 2005 where entry tariffs had to be lowered to

5%. This was replaced by other duties resulting in no net decrease in automotive prices for

importers.

In the United Kingdom, Proton cars suffer somewhat from a poor public image. They

are considered deeply unfashionable with younger drivers, they are identified as being a

vehicle popular with elderly people. In 1998 Proton attempted to change this by

introducing the Proton Satria GTi however, the car was somewhat out of reach to younger

drivers due to high insurance premiums. The Satria GTi also sported a "Lotus Ride &

Handling" badge which, coupled with an average security system, made it easy picking for

a potential thief. However, the vehicle was a success as far as handling was concerned

which meant that, coupled with its 1.8 16-valve Double Overhead Cam Engine (which

produced 133bhp) a number were purchased by Octogon Race Circuits and used as track

cars at Silverstone and Brands Hatch racing circuits.

Proton cars were imported into Trinidad and Tobago between 1993 and 2002. They

were sold through a local dealer, H.E Robinson Ltd. Only the Saga and Wira ever reached

this market with the Wira enjoying modest sales success. The bankruptcy of the dealership

forced the exit of Proton from Trinidad and Tobago in 2002.

MARKET GROWTH

Proton market growth have been drop in 2006, Proton's sales dropped 30.4% from

166,118 in 2005 to 115,538 for the Malaysian market, with a later report indicating a 55%

fall of sales to 962.3 million ringgit, its lowest in at least seven years. This allowed Perodua

to overtake Proton as the country's largest passenger carmaker for the first time, with a

41.6% market share, while Proton's market share fell from 40% in 2005 to 32% in 2006. In

the period ending December 31, 2006, Proton has also suffered three consecutive quarterly

losses. Compared to a profit of 86.5 million ringgit in 2005, the car company lost 281.5

million ringgit in 2006. Proton blamed discounts from rivals. Total losses in 2007s

financial year climbed to $169 million. The Employees Provident Fund (EPF) acquired an

additional 830,000 shares in a transaction that spanned between January 5 and January 12,

2007.

In 2008 improved performance was achieved on the back of increased revenues to

RM5.6 billion compared with RM4.9 billion in the previous year. The increased revenue

generated from increased sales volume, was mainly due to the introduction of PROTON’s

two new models, the PERSONA and the SAGA. The group has also benefited from its

revenue diversification program with income from sale of rights for use of its intellectual

property, in its export markets. PROTON understands the importance of introducing new

products and models that meet the expectations of the market. This is clearly demonstrated

by the good reception to the PERSONA and SAGA. As such, PROTON is committed to

further enhance its R&D and product development activities with a view to further invest in

projects that meet the requirements of the market and allow for quick commercialization. In

the last financial year alone, PROTON spent over RM500 million on R&D projects and

activities, in-line with this philosophy. For the current financial year ending 31 March

2009, given the new product range, PROTON expects to significantly improve its exports

performance further. The PERSONA and SAGA are planned to be launched in PROTON’s

major export markets from June 2008 onwards.

SWOT ANALYSIS

Strengths

Ties with other ASEAN markets are strengthening all the time through AFTA induced

tariff reductions, which will provide advantages for carmakers basing themselves in

Malaysia. The market continues to attract investment from major carmakers, with General

Motors (GM) forming a tie-up with DRB-HICOM in August 2007.

In addition to successes in product portfolio, Proton has also made commendable

progress to bring about other operational improvements. The focus on cost management

resulted in cost savings for new models, which were then passed on to the customers

through competitive pricing.

Emphasis on the elevation of the automotive eco-system saw the strengthening of the

vendor base and dealer network. These rationalization initiatives enabled Proton together

with vendors and dealers to deliver improved quality of service and be more competitive.

Proton will continue to strengthen itself in all aspects to operational, financial and

corporate to better equip itself in the years ahead. It will adopt a three-pronged thrust

namely development of market-driven products, focus on high growth regional markets and

a production strategy that achieves economies of scale.

Weaknesses

The national industry is in decline, with Proton losing market leadership for the first

time in 2006 (albeit to fellow national producer Perodua). Protectionist measures are still

barring new entrants; particularly Chinese manufacturers such as Geely Car ownership

levels are relatively high at one car for every four people, compared with one for every 30

in neighboring Thailand and Indonesia

After that, the existing quality issue can affecting brand image caused by active service

units such as political interference by Tun Porsche on vendor selection, appointment of top

management and design. Plant utilization low can also inability to retain and cultivate

talent, inability to introduce real new models, no economies of scale, inability to penetrate

export markets, inability to satisfy customers' needs, no sense urgency, corporate

governance and complete numbness of developments in the auto industry. Funds shrinkage

can influence result in Proton inability to introduce new models.

Opportunities

The entry of Danish vehicle tuner Kleeman could provide a boost for the premium

vehicle segment. Proton’s export plans could help to offset its declining domestic influence

and improve its global performance.

Faced with declining domestic sales and uncertainty regarding a strategic partnership,

Malaysia’s Proton has set its sights overseas. The company is evaluating a plan to build a

production plant in Egypt, which would act as a gateway to Africa and West Asia and boost

the carmaker’s exports. Proton already sells its Gen. 2 and Savvy models in African

markets, such as Egypt and South Africa, confirming that a market for the company’s

models already exists. According to Proton Managing Director Syed Zainal Abidin Syed

Mohamed Tahir, Egypt provides a large market but could also act as a base to countries

such as Saudi Arabia and Sudan.

Starting in November 2007, Proton also plans to sell 30,000 units in China by end-

2008. The models will be sold under the Europestar brand by distributor Youngman

Automobile Group, which was appointed in July. Proton will initially export completely

built units (CBUs) to China, although this will change to completely knocked down (CKD)

kits for assembly from mid-2008. Talks with Indian distributors are underway but no

concrete arrangements have been made. Elsewhere in Asia, Proton has also appointed a

Thai distributor. Phranakorn Auto Sales will initially sell Proton models in 20 dealerships,

with the network due to double within four years.

Threats

Malaysia’s trade dispute with Thailand over non-trade barriers in the automotive

industry could hamper the export projects of major carmakers Burgeoning capacity levels

of around 700,000 units could result in a supply glut Thailand’s ‘Detroit of Asia’ strategy

threatens other manufacturing bases in the region.

Other than, Proton and Perodua has been at each other’s heels since December 2006

when Perodua outsold Proton in monthly sales by 99 cars. Perodua’s lead was short lived

when Proton outsold Perodua the following month by 550 cars. In February, Perodua

outsold Proton again, beating Proton monthly sales figures by 763 units. This time

however, the Malaysian Automotive Association reports that Perodua’s monthly sales have

topped Proton by a massive 4,284 units, making it have a market share of 44% (13,574

units) as opposed to proton’s 30.35% is 9,290 units. For every Proton Savvy sold by

Proton, Perodua sold Perodua Myvi. The Myvi has proven to be a stunning success.

COMPETITOR ANALYSIS

Malaysia has become a hotbed of production activity in recent years thanks to a raft of

new assembly licences granted to international manufacturers. According to Mahaleel

Ariff, chief executive of stateowned Proton, Malaysia’s output capacity has now reached

700,000 units, of which his company and fellow national Perodua account for 500,000

units. However, production fell from 563,408 units in 2005 to 503,048 units in 2006. The

competitive position of state-owned carmakers Proton and Perodua has remained a key

focus for the Malaysian automobile industry in recent years, with the two firms’ combined

market share declining. Proton has been particularly hard hit. A bloated workforce and a

lack of new models have not helped the firm, with the double-edged sword of long-

standing government protection militating against efficiency. In 2006, the company lost

leadership of the market for the first time, falling behind Perodua.

After that, leadership of the passenger market shifted for the first time ever from

national manufacturer Proton to local rival Perodua in 2006, as the domestic giant’s sales

fell by 30%, to 115,538 units or 32% of the market. Perodua, on the other hand, increased

its sales by 14%, to 152,733 units, boosting its market share from 32% in 2005, to 42%.

The overseas brands saw their combined share of the passenger market fall slightly from

23% in 2005 to 22% in 2006. In terms of total sales for all segments, Perodua again made

its mark, claiming 32% of the market from sales of 155,419 units, while Proton trailed with

24% from sales of 115,706 units. Toyota’s share of the total market is double that of its

passenger car share with 16.7% with Honda pipped for fourth place by local firm Naza on

6.5%, against the Japanese brand’s 5.4%.

The competitive environment category measures the opportunity for new market

entrants, based on existing manufacturers and brands in the country. Despite increasing

numbers of carmakers launching production activities in Malaysia, some major

manufacturers are still absent leaving opportunity for extra competition. The market scores

5 out of 10. Another that, competitor is Toyota Motor Corporation; Honda Motor Company

Ltd.; Shenyang Brilliance Automotive Company Ltd.; Mitsubishi Motors Corporation;

Yuejin Motor Group Corporation; Hyundai Motor Company Ltd.; Mazda Motor

Corporation; Daewoo-FSO Motor S.A.; Isuzu Motors Ltd.; Kia Motors Corporation and

Toyota Astra Motor PT.

Finally that, Perodua’s successful tie-up with Japanese manufacturers, as well as an

emphasis on small, fuel-efficient vehicles, allowed it to overtake Proton in passenger-car

sales in 2006. It outsold Proton in the domestic market both in 2006 and 2007. However, its

subcompacts do not directly compete with larger, more expensive Proton offerings. The

company has 140 sales outlets and 37 service branches and 113 service outlets across

Malaysia.

Product Offerings

- Proton Saga (1985) - Proton Juara (2001)

- Proton Iswara (1992) - Proton Waja (2001)

- Proton Wira (1993) - Arena (2002)

- Proton Staria GTi (1994) - Gen-2 (2004)

- Proton Putra (1995) - Proton Savvy (2005)

- Proton Tiara (1996) - Proton Persona (2007)

- Perdana V6 (1998)

Proton Saga (1985)

The Proton Saga is the first car produced by Malaysian auto manufacturer Proton.

Originally based on the 1983 Mitsubishi Lancer Fiore, the Saga first debuted in September

1985 and retained its core Fiore design for two decades, before a successor designed in-

house by Proton was launched to replace the ageing platform in 2008. Since 1985, the

Proton Saga and its variants contribute to most of Proton's sales and revenues. The Saga is

also the longest surviving model produced by Proton, soldiering on for nearly 22 years.

Proton Saga Iswara (1992)

In 1992, the Saga was given a facelift and its name expanded as Proton Saga Iswara (also

known in short as Proton Iswara), after a species of butterfly. Modifications included

slimmer headlights, plastic bumpers, side mouldings, coloured door handles, grooved

taillight clusters and rear number plate repositioned to the bumper. This particular model is

used as taxis in Malaysia and some are converted to NGV. Due to the modification, boot

space was reduced by half to accommodate the NGV tank and there are only a few petrol

stations by Malaysian oil-giant Petronas.

Proton Wira (1993)

The Proton Wira is a car manufactured by Malaysian carmaker Proton, released as a four-

door saloon and four-door hatchback beginning 1993. The Wira was intended as a newer

alternative to the Proton Saga Iswara, a facelifted version of Proton's first model, the Proton

Saga, as a flagship compact model for Proton. The Saga continued to receive minor

updated until 2008, when a second generation Saga was introduced as a sub-compact

model instead.

Proton Staria GTi (1994)

The Proton Satria was a hatchback produced by Proton. Production started in 1995 for the

first generation and ended in 2005. The new Satria Replacement Model (SRM), known as

Proton Satria Neo was launched on 16 June 2006. The name Satria which means knight in

Sanskrit was chosen for Proton's 3-door hatchback to reflect the sportiness of the car.

Proton Putra (1995)

The Proton Putra is also sold in the United Kingdom and Australia as the Proton Coupe or

Proton M21. After that, the car is a 2-door sporty coupe based on the Mitsubishi Mirage.

Considered by many as one of the better looking of the Mitsubishi-based models, the Putra

was well-received and commands good second-hand value.

Proton Tiara (1996)

The Proton Tiara was a supermini class 5 door compact car based on the Citroën AX. It was

built under licence from PSA Peugeot Citroën by Proton from 1996 to 2000. The Tiara was

powered by a 1.1L engine and featured a different grille, tail lights and bumpers than the

Citroën AX. Its successor is the Proton Savvy.

Perdana V6 (1998)

In 1999, Proton shoehorned a 2.0 L 6A12 V6 engine (also sourced by Mitsubishi) into the

Perdana. The so-called Proton Perdana V6 also had a new bodykit and 16" rims. The

original Perdana soldiered on for a short while before it was dropped. With Lotus-tuned

and upgraded suspension settings, the car handles well through tight corners and it is a

good high speed cruiser.

Proton Juara (2001)

The Proton Juara was a microvan produced by Malaysian carmaker Proton between 2001

and 2003. The design and production of the Juara marked a notable departure from Proton's

traditional preference towards saloons and hatchbacks, making the Juara the first van to be

manufactured by Proton. In its marketing campaign, Proton decided that the Juara is

essentially a Mini-MPV (Multi-Purpose Vehicle) and became the platform in its advertising

and promotional campaign.The van's name was derived from the Malay language, meaning

"champion".

Proton Waja (2001)

The Proton Waja (Proton Impian in Europe) is the first Proton to be designed and

styled in-house. However, the car's chassis and engine were sourced and adapted from

Mitsubish (except for the 1,800 cc variant, which was powered by a Renault engine). The

word Waja translates into English as "steel" while Impian translates into "dreams" or

"ambition". The name Impian was chosen as it was considered to be a more pleasant

sounding word for the international market.

In January 2006, the car was fitted with a Cam Pro engine which has been re-tuned to

boost the horsepower to 86 kW (115 bhp) and 155 N-m of torque. This made it go full-

circle, as the CamPro was originally developed for the Waja, but was deemed not ready for

production when the Waja was launched, hence debuting in the Proton Gen-2. The

facelifted 2007 Proton Waja was launched on 19 January 2007 with the new grille nearly

identical to the Proton Savvy.

The Waja was also released as the Proton Chancellor in late 2005, a variant for the

executive market with a 250mm wheelbase stretch and luxury fittings and accessories,

including a space-robbing rear centre console that restricts seating to four persons. It is

fitted with powertrain from the Proton Perdana V6. With a selling price of about twice that

of a Waja, the Chancellor is a very rare sight on Malaysian roads.

Arena (2002)

The Proton Arena (or the Proton Jumbuck in the United Kingdom and Australia) is a small

front wheel drive coupé utility manufactured by Malaysian automaker Proton. Introduced

in 2002, the Arena is the only form of pickup truck by Proton, and is the only Proton model

to enjoy significantly more popularity in its export market than domestically.

Gen-2 (2004)

The Proton Gen-2 is the first fully Malaysian-developed (including chassis and engine)

Proton car and the replacement model for the Proton Wira; launched on February 8, 2004.

Proton still continued to sell the Wira after the Gen.2 was launched, due primarily to the

popularity of sedan/saloon vehicles in the target market. The Gen.2, a hatchback design, is

considered by many to be the best-looking Proton. It has a minimalist and modern interior

with design cues from the Lotus subsidiary. However, very low quality of materials and fit

and finish of interior components seriously hurt the public's perception of the quality of the

vehicle at launch. Later models used improved quality materials and assistance from the

TUV of Germany to help maintain the quality improvements.

The Gen.2 was the first Proton to receive the (inappropriately) named CamPro engine,

which at launch was widely criticised for the lack of low- to mid-range torque (pulling

puwer), due to a late decision to drop Camshaft Profiling from the engine feature-list in

production models. Attempts to improve this torque deficit by adjusting ECU parameters

have largely been unsuccessful. Published engine torque curves still show a pronounced dip

in torque output in the crucial 2000-3000 RPM engine speed region, presumably due to the

missing engine feature.

Proton Savvy (2005)

The Proton Savvy was launched on June 8, 2005. The 1,200 cc 5-door supermini car.

The car is fitted with an engine and a gearbox sourced from Renault. In an official on-road

test made by Proton in mid-2006, Proton Savvy recorded the fuel consumption rate of

about 24 km/L at constant speed of 90km/h (or about RM0.08/km of fuel), making the car

as the most fuel-efficient Malaysian car as verified by Malaysian Book of Records. Even

with very good fuel efficiency the car maintenance were reportly to be very high even

surpassing the Proton Waja. This is because of the use of the European Renault engine.

Proton Persona (2007)

The Proton Persona was launched on 15 August 2007. The 1.6 liter sedan is based on the

Proton Gen-2 and features a sedan body instead of the Gen-2's hatchback body. It retains

the same 82kW Campro engine. The Persona is rebadged as the Proton Gen-2 Persona in

the UK market.

CRITICAL ISSUES/ CHALLENGES

The Proton badge today does not carry much brand equity. Many view Proton as a

maker of cars that lack excitement but which are relatively cheap compared with Japanese

or South Korean makes.

The company needs more desirable models like the Persona, which has helped in

reviving sales, and would have to maintain its recent improvements in quality as that would

have a strong bearing on its acceptance level.

Proton's Campro engine, which is the main staple of its product line, is hardly cutting-

edge given today's technology. Proton also lacks an engine or platform to expand into the

SUV and MPV markets, or the 2.0-litre and above segments. Proton may need to

collaborate with a foreign partner much in the way BMW and PSA Peugeot-Citroen are

working together to develop new engines and technologies.

In the longer term, many of the green engine technologies that are emerging as a result

of rising fuel prices and global warming would dictate the direction of automotive

development, and these are beyond Proton's capabilities. It is of some comfort, therefore, to

learn that the Government is still willing to consider a strong strategic foreign partner in the

future.

On its own, Proton has limited funds for research and development. And the bulk of its

exports are mostly confined to less mature markets, including China and some Gulf

Cooperation Council. A tie-up with a strong foreign brand will enable Proton to penetrate

more discerning markets.

But how many foreign stakeholders would be willing to invest the money in Proton to

develop new infrastructure and facilities and share their latest technology without being

given a substantial or controlling stake in the car maker? That is a matter for the

Government to ponder on when the time comes.

MARKETING STRATEGY

MARKETING OBJECTIVE

PROTON commands a substantial share of the domestic market for passenger cars and

over the years has been building up distribution networks in key market centres across the

four regions:

• South-East Asia,

• the Middle East,

• United Kingdom / Western Europe, and

• Australasia.

The main business activities of the Group encompass vehicle engineering, research &

development, manufacturing, distribution and after-sales services. The Group is also

involved in financial services and property management in supporting the main business

activities. The Group designs and produces cars for diverse consumer preferences. T

he portfolio of PROTON models includes the reliable family-sedan Waja, the stylish

Gen.2, the elegant Perdana V6, the versatile Arena, the proven Saga range, the fun-to-drive

Savvy, the desirable sporty Satria Neo and the ‘2008 Best Model of the Year’ winner, the

Persona. The Group also has in its portfolio, the world-renowned Lotus sports cars,with

models such as Elise, Esprit, Exige, Europa and the recently unveiled Evora (which will be

available in the first half of 2009) to suit a range of customer demands and preferences. The

Group conducts research in its centres in Malaysia and the United Kingdom on new

technologies to create cars that are unique in both design and driving performance. Through

Lotus, the Group provides comprehensive and versatile consultancy services to many of the

world’s OEMs and Tier 1 suppliers.

Currently, the Group has almost 12,000 employees who are involved in the whole

value chain of the business, from research, design, development, testing, stamping, casting,

machining and assembly to marketing, distribution and after-sales services. Strong

customer orientation and competitively priced products are the foundation of our business

and essential to our success. We aim to maintain market leadership by continuing to

develop innovative products and satisfy our customers needs better and enhance

profitability.

MARKET SEGMENTATION

Quality is about customer satisfaction and meeting customers’ expectations. It is

indeed challenging, to say the least, to improve quality in the market given the ever-

changing expectations and quality perception among car buyers today. As such, the key to

improving quality in the market is to understand the needs and perceptions of our

customers.

Towards this end, the Group established a ‘Voice of Customer’ framework to facilitate

feedback on quality issues from the market. This is vital in order to establish quick and

effective counter-measures to resolve critical quality issues in the market in a timely

manner while preventing recurrence of the quality issues in future models.

During the year under review, a new feedback mechanism called Customer Priority

Index (CPI) was introduced with the aim to help drive and resolve quality issues in the

market. CPI is a matrix that calculates and prioritises customer feedback based on aspects

such as technical data, warranty claims and severity of the quality issue. The Group also

gauged feedback on product quality in the market via indicators such as concerns per car

(CPC), delivery quality defect-per-unit (DPU) and warranty provisions.

On this scoresince the Persona and new Saga were introduced into the market,

customer complaints have reduced significantly and quality perception for PROTON

products has greatly improved as reflected in the notable improvements in the CPC and

DPU levels. Additionally, from the market feedback gauged via warranty provisions and

Product Quality Report (distributors’ feedback), we have recorded remarkable

improvements that reflect PROTON’s strong commitment to satisfying our customers’

needs.

MARKET POSITIONING

Launch of New Products

The engine of growth for any car manufacturer lies in its products. PROTON’s single-

minded approach to renew its product line-up to meet the evolving needs and requirements

of the buying public resulted in the roll-out of the Persona and subsequently the iconic Saga

during the year under review. Having invested much time and effort in the three years that

are typically required to conceive and develop new models, PROTON is indeed pleased to

note that the response to date from car owners has been extremely positive, to say the least.

The Persona is the first to embody PROTON’s philosophy of manufacturing ‘the right

car for the right market at the right time for the right price’. The Persona has received over

50,000 in bookings as at end July 2008. The Persona was followed by the unveiling of the

new Saga, the car that remains the embodiment of Malaysia’s aspirations to be an

internationally competitive auto manufacturer.

The experience and lessons PROTON has garnered over the years have been

embedded into this new model. This has translated into bookings of almost 70,000 units

within six months since its launch. It is currently the fastest-selling model in PROTON’s

history. Both the Persona and Saga are also expected to contribute significantly to

PROTON’s export sales in the very near future. Within the PROTON Group, Lotus Group

International Limited (“Lotus”) has also unveiled a brand new thoroughbred that is set to

take the world of performance cars by storm. The Lotus Evora is the first new Lotus model

to be launched in over 13 years. Entering the market above the Elise, Exige and Europa,

this new Lotus will be available in the first half of 2009 and is expected to contribute

positively to the Lotus Group.

TARGET MARKETS

- Proton is the biggest Malaysian automobile manufacturer. Proton automobiles are

available in many countries such as China, Singapore, Australia, Algeria and United

Kingdom. Proton has commanded the local automotive market.

- Malaysia’s Proton sets ambitious car export target.

MARKETING STRATEGIES

It is imperative that PROTON keeps its focus firmly on the road ahead. The Group

must not only be flexible and adapt to the constantly changing environment, but must also

be committed to carry out long-range initiatives aimed at further strengthening its

engineering and manufacturing foundations. With its expanded product range, improved

quality and value for money product positioning, the PROTON brand will become

increasingly attractive. This is what will drive sustainable growth for PROTON and

positive returns for its shareholders. Most certainly the road ahead will be paved with

challenges, but PROTON now has the benefit of experience and is rapidly strengthening

the foundation for its future growth.

However, PROTON cannot depend solely on the domestic market to grow. As

indicated in the previous year's report, to prosper and thrive, PROTON has to expand its

export potential further. Tangible and sustainable growth in the international market will be

the mainstay for PROTON as it aims to expand its market share and sales volume in the

export markets. Whilst PROTON has already gained a foothold in some markets, there is a

need to explore new emerging markets to tap into. In line with PROTON's 10-year

roadmap, the Group is committed towards expanding its regional presence in terms of sales

and distribution, particularly in ASEAN, China, India, and the Middle East. Already, its

strategies to grow the brand beyond Malaysian shores are beginning to show progress in

terms of sales growth. It must now also source components and identify manufacturing

facilities that will optimise costs and efficiency.

The Chinese automotive market in particular, remains a very important market for

many automotive manufacturers. PROTON, like other automotive manufacturers, regards

China as an important market and one that it should participate in to be a competitive

automotive player in the long run. In July 2007, PROTON entered into a business

arrangement with Jinhua Youngman Automobile Manufacturing Ltd (Jinhua Youngman) to

supply 30,000 units of Gen2 CBU cars over a period of 20 months. These cars will be

rebadged and sold in the Chinese automotive market under the Europestar brand. Although

the numbers are modest compared to other automotive manufacturers, this is a significant

achievement for PROTON, representing the largest single export order of PROTON cars

since its establishment in 1983. There is also large growth potential in this arrangement

with Jinhua Youngman, both in terms of CBU units to be exported, licensing of engine and

platform, as well as expanded scope of opportunities in engineering services and technical

assistance.

For the Malaysian vendor community, this will also represent significant additional

volume for their manufactured components.PROTON is also expanding its non-

manufacturing business by optimising revenue that can be obtained from its Group

intellectual property. An example of this strategy can already be seen in the business

arrangement entered into between PROTON and Jinhua Youngman. This business

arrangement not only enables PROTON to indirectly enter the expanding Chinese

automotive market, but also enables its subsidiary, Lotus Group International Ltd, to gain a

strong foothold in the Chinese automotive engineering services market.

PROTON is also mindful of the need to improve operational efficiency, particularly

with regard to improved capacity utilisation. Towards this end, PROTON has identified

contract manufacturing for other OEMs interested to enter this region as a possible means

to supplement its own manufacturing volumes.

MARKETING MIX

Product

Proton saga, iswara, wira, waja, perdana, gen 2, pesona, savvy.

The importance of ensuring we have a strong product portfolio is all the more crucial as

it has a pivotal impact on our turnaround plans. This is reinforced by our winning strategy

of introducing ‘the right car, for the right market, at the right price and at the right time ’.

This strategy was reflected in our newly introduced Persona and Saga models, with the

latter powered by the new CamPro IAFM engine during the year under review and suffice

to note, these two models are performing tremendously well in the market to date.

Furthermore, we have continued to update and refresh our existing product lines to

entice and attract customers. The re-energised Waja and Gen.2, with their new look and

powerful CamPro CPS engine, and the economical Savvy re-designed to give better value

proposition to the buyers of the Savvy Lite, have successfully managed to excite car

consumers in Malaysia during the year under review. Staying on course, PROTON will be

launching our first MPV in early 2009, further solidifying our product line-up to include a

high quality multi-purpose vehicle that can cater to the family-oriented contemporary

lifestyle.

Other exciting offerings are also in the pipeline with replacements for the Waja and

iconic Perdana on the drawing board. To sustain this positive momentum, we will continue

our research and development (R&D) efforts and comprehensive market surveys to gain a

deeper understanding of the needs of our customer base. By harnessing the right

technology and keeping our finger on the pulse of customers’ requirements, we truly

believe that this will bring us closer to achieving our goals of a dynamic product portfolio.

Product Development

With robust product planning, we were able to introduce both new and improved PROTON

cars in the year under review, marked by the successful launch of the Persona in August

2007, followed closely by the unveiling of the new Saga in January 2008.

Product Refreshments

Gen.2

The face-lift of Gen.2 was done in tandem with the initiation of the Persona project to

take advantage of cost sharing given that both projects share similarities in terms of their

interior design. As a result of the exterior face-lift, the Gen.2 now features a new bumper,

body kit, colour and alloy rims. We also upgraded parts of the exterior and interior of the

car based on customers’ feedback while introducing the much-anticipated CamPro CPS

powertrain. The engine’s Variable Intake Manifold (VIM) switch alternates between a long

intake manifold at low engine speeds and a short intake manifold at higher engine speeds.

PROTON is applying a longer intake manifold to achieve slower air flow, as this system

has been found to promote better mixing of fuel. The short intake manifold will allow more

air to enter faster and be especially beneficial to engines at high Revolutions Per Minute

(RPMs). With extra power, better handling and improved quality, the refreshed Gen.2 is set

to become a highly competitive model in the sporty C-segment automotive category.

Price

SATRIA 1.3GLi SE (Metallic) 42,888.12

WIRA Peca 1.5GL (Metallic) 47,320.00

WIRA 1.5GLi SE Aeroback Metallic) 50,027.97

WAJA 1.6L SOCH (Manual) 59,455.60

GEN-2 1.6 DOCH Auto (Metallic) 58,114.50

PERDANA V6 2.0(A) 106,096.94

ISWARA Aeroback 1.3S-LMST (Metallic) 38,500.81

Interest Rate is 3.88% for 7 years and 3.99% for 9 years.

2 years standard manufacturing warranty plus 3 years Extended Warranty.

Interest Rate is 3.88% for 7 years and 3.99% for 9 years.

Promotion

The year under review saw PROTON aggressively augmenting the International Sales

& Services Division with additional human resources, focusing primarily on technical

support as well as after-sales and customer services. Clearly, this investment reflects the

importance of the export market in PROTON’s long-term growth. In terms of market

expansion, the Group successfully penetrated into China and Thailand, while expanding

our reach in Iran, the Middle East and Indonesia.

At the same time, we re-energised the Saudi Arabian market, which is crucial to our

success in the Middle East. The year also saw the implementation of a special programme

for semi knocked-down (SKD) and completely knocked-down (CKD) exports to Iran and

China, which are expected to contribute positively towards thenew financial year’s export

volume growth PROTON’s technical support and after-sales service capabilities must be of

high standards in order to further enhance PROTON’s brand equity in the international

market. Towards this end, several ‘Service Campaigns’ were held during the year under

review in our key export markets. Also known as PROTON STAR, these campaigns

included customer-focused initiatives ranging from a 43-point check to discounts for spare

parts.

Naturally, these campaigns are ideal platforms to bring PROTON closer to the

international customer base. During the year, there was also a marked increase in the

frequency of visits by both the sales and technical teams to the various countries in which

PROTON has presence, to enhance our understanding of the markets and provide better

response to the customers.

Place

Indonesia

Performance and Operations

PT Proton Edar Indonesia registered higher sales of 1,422 units compared with 546 units in

the previous fiscal year. In July 2007, the company launched the Waja and Neo models in

conjunction with the Indonesia International Motor Show 2007.

Prospects

The Indonesian Automotive Industry Association (Gaikindo) had forecasted a steady total

industry volume growth over the next three years from 500,000 units in 2008 to 600,000 in

2010. The Company is expected to perform better in the next financial year with the

launching of the Gen.2 Persona in July 2008 and the new Saga before the end of 2008. To

achieve the anticipated sales increase and improve the after-sales support, the Company has

expanded its network by an additional four branches and five dealers.

Thailand

Performance and Operations

PROTON made its entry into Thailand on 30 January 2008 through its wholly-owned

subsidiary, Proton Motors (Thailand) Limited. Within a short span of time, PROTON

managed to successfully penetrate the Thai market with sales of its cars exceeding 1200

units within the first six months of its launch. Since making in-roads into the Thai market,

PROTON captured 1.3% of the market share in the passenger car segment and was ranked

8th overall.

Prospects

For financial year 2008/09, PROTON aims to achieve sales of 4000 units through the sale

of various models including the Savvy, Gen.2, Neo and Persona.

Singapore

Performance and Operations

The Certificate of Entitlement quota for cars in Singapore was lower by 3.1% in 2007.

This reduction signaled the end of bumper quotas in the island state and resulted in

distributors reducing their margins to clear outstanding stock. The year also saw the

introduction of Chinamade cars into Singapore. Currently, 80% of cars in Singapore are

less than four years old while 90% are less than five years. The reduction in quota, coupled

with the introduction of China-made cars led to a 43% reduction of brands operating in our

segment.

Sales were also further affected by the increased petrol prices and tightening of credit

due to the sub-prime fall-out in the US, as banks were more cautious in lending money. On

another note, the PROTON Persona launched in October 2007 received encouraging

response and drew accolades from both thepress and customers.

Prospects

Given the market conditions in Singapore, a number of initiatives are in

the pipeline to increase our operational efficiency here.

United Kingdom

Overview

Contrary to concerns surrounding the automotive industry, the overall UK total

industry volume (TIV) in 2007 increased by approximately 2.5% to reflect over 2,400,000

sales. The increase was due to the business and fleet sectors where sales rose by 5.5% and

3.3% respectively, while private buyer sales were static, contributing only 43% of the total

market share. Sales of diesel cars continued to rise, capturing over 44% of market share by

end-2007, and is forecasted to sustain its momentum. With regards to body types, the only

significant growth came from MPVs which rose by over 16%, usurping sales from the

more traditional three, four and five-door segments.

The year 2007 also saw the top ten market leaders focusing on private buyers with all

of them seeing a substantial rise in sales, now accounting for over 70% of the entire UK

volume between them. One of the key topics that took centre-stage in 2007 was the ‘green

issue’ which influenced the perception of the UK buying public. Sales of ‘green’ cars were

spearheaded by both the Government through vehicle taxation and manufacturers of highly

fuel-efficient and low CO2 emission vehicles marketing its benefits. Sales of low CO2 tax

band vehicles rose by 15%, while high tax band CO2 vehicle salesdropped by 17%.

Performance and Operations Overall, Proton Cars (UK) Ltd saw a reduction in sales by

8% during the year under review. Nevertheless, despite reduced marketing expenditure,

retail sales increased by 3.5% during the period, which bodes well for the brand in the long

term. Sales of the Gen.2 model improved during the year and the Satria, which was

launched in March 2007, was well-received by dealers, motoring press and the general

public. However, sales for Waja were impacted due to a drop in demand throughout the

segment while the Savvy faced severe competition from other brands in its category.

Prospects

In the second half of 2007 and early 2008, the operating environment in the UK became

more challenging with higher interest rates, a slow-down in the housing market and rising

cost of living. Given these market conditions, Proton Cars (UK) is adopting a number of

initiatives which will lower operating costs, while maintaining a high level of support for

our dealer network and customers.

Australia

Overview

The total Australian vehicle sales grew by 9.1% and reached a record 1.049 million units.

Sales of smaller fuel-efficient vehicles accounted for the majority of the increase due to the

increasing price of oil and rising interest rates. The small and light segments, which

PROTON competes in, grew by 10.2% and 5.9% respectively whilst PROTON’s retail

sales increased by 16%. The current shift of sales towards smaller vehicles is expected to

continue as fuel prices continue to rise and the economy slows down. Performance and

Operations The positive financial results were due to improved Lotus vehicle sales and

reduced operational costs by Proton Cars Australia. In addition, the company also managed

to increase retail sales during the financial year in the face of heavy discounting by its main

competitors.

Prospects

Automotive sales in the coming financial year are expected to ease slightly on the back

of rising interest rates. On top of this, high fuel prices are projected to shift customers’

preference to more fuel-efficient models which could translate to increased sales in the

small and light vehicle segments. However, the launch of Persona in May 2008 and the

subsequent release of the face-lift Gen.2 are expected to boost volume by 22% in the new

financial year.

The number of dealers is also estimated to increase slightly. However, Proton Cars

Australia will be implementing an aggressive rationalisation programme to improve dealer

throughput and increase the yield in under-performing regions. The strong focus on these

two key areas is expected to result in increased revenue and better operational returns.

Proton Cars Australia successfully increased its dealer network to 41 dealers nationally

during this period. Currently, all main regions throughout Australia are covered. Sales of

the Savvy and Jumbuck also improved significantly towards the end of the year under

review as a result of several innovative marketing campaigns. The Savvy in Australia.

CONTROLS/ACTION PLAN

Implementation Strategic

Implementation Plan

Auto-scrapping Scheme

Proton already has a scrapping scheme running since the year 2007 called Proton XChange

where old cars over 10 years old and owned by the owner for at least 6 months, registered

and roadworthy can be traded in for RM 5,000 and so far up to 2,700 of such discounts

have been issued. Once a car has been surrendered to Proton under the scheme it will be

de-registered from the Road Transport Department and scrapped. Beside that, anyone who

scraps their cars which are older than 10 years will receive a RM5000 discount to buy a

new car, but only a new Proton. There is also zero incentive for those looking at a newer

second hand car, even if it is a Perodua or Proton. The scheme will help proton to improve

sales amid unfavorable consumer sentiment due to employment market uncertainties and

could help boost car sales and rejuvenate the local automotive industry.

Quality Control Campaign

Quality Control campaign would address employees, production practices and components

manufactured by it’s suppliers to make improvements to Proton quality. The launch of the

quality campaign was based on the commitment of ensuring all Proton cars were free of

defects. It wants to reverse this negative perception that Malaysians have on its cars, and is

to get rid of the negative perception of brand image. It is going down to the core of the

problem and evaluating its product range and it’s suppliers to weed out the quality control

issues. Proton had always emphasized quality control in all aspects of its operations but it

was now drawing on lessons from the past to ensure current levels of quality control were

stepped up. Proton had recently established a monitoring system to identify defects on the

production line to respond faster to problems of defective components. Proton was looking

to further tap the markets in Asian, China, India and the Middle East. The high number of

bookings for the Persona and Saga to date is reflective of growing customer confidence

with regards to Proton's new commitment to quality.

'Zero-Defect' Campaign

Proton launched a 'zero-defect' campaign aimed at erasing a reputation for poor quality that

has left it struggling to compete against foreign competitors. Proton also plans to fit all

models with natural gas tanks from October to help motorists beat the rising cost of fuel.

With the recent fuel hike, consumers want quality cars and they have high expectations.

Proton wants to focus on rebuilding the company. The focus is putting Proton on a better

footing, to improve quality, product and profit and need to be prepared to compete globally.

The company will further tighten production controls and conduct audits before cars are

rolled out to ensure that there are no rattles and squeaks any more.

Proton's maiden multi-purpose vehicle (MPV)

Despite the economic slowdown, Proton's maiden multi-purpose vehicle (MPV) slated to

be launched in April 2009 is expected to give a serious challenge to other comparable

MPVs due to its competitive pricing and value for money. Proton Exora, to be powered by

a 1,600cc engine, would be priced below RM80000. At this current price, proton believe

Exora will give a serious challenge to Toyata Avanza (maximum price: RM72000 for

1,500cc) and the Nissan Grand Livina (maximum price: RM97000 for 1,800cc). Proton

registered a 4% decline in sales to 9874 units last month; Perodua posted a 5 % decline to

9874 units, while Toyota recorded a more worrying contraction of 41% in January sales.

On the other hand, Nissan sales in January 2009 came in strong with a 17% increase in

volume to 2,285 units while its total industry value has dipped by 5.0% compared to the

same month last year. Car manufacturers were keeping mum on their new launches perhaps

due to the fear of weak response as the economic outlook continued to look challenging.

Contingency Plan

The global and local automotive industries are facing one of the most challenging periods

in recent history with buyers being cautious amid the global economic crisis. The

government today announced that it will assist in the auto-scrapping scheme for Proton and

Perodua. The government’s plan, announced under the second economic stimulus package

tabled today, was timely and would positively impact the industry. Proton need every bit of

help from the Government during this difficult period to ensure its survival as close to

200,000 people are directly and indirectly linked to the automotive industry nationwide.

The scheme was also an important tool in the automotive industry’s environment

management. It could help the industry to dispose old cars more efficiently and responsibly

whilst protecting the environment. Malaysia will follow the footsteps of other countries like

Spain, France and Italy. The UK (is also) contemplating the implementation of such a

scheme in the near future to spur car sales. Once surrendered, the car cannot be returned.

Bibiolografi

Analysis SWOT Proton

http://g4.buildboard.com/images/attachpic/g4/B400/

B400F1844T909_8195ded601b2dd2aaee71cb07bd4c006.pdf

ANNUAL REPORT PROTON 2002

http://www.proton.com/public/media/mediacentre/documents/annualreports/

AReport_2002_Full.pdf

ANNUAL REPORT PROTON 2003

http://www.proton.com/public/media/mediacentre/documents/annualreports/

AReport_2003_Full.pdf

ANNUAL REPORT PROTON 2005

http://www.proton.com/public/media/mediacentre/documents/annualreports/

AReport_2005_Full.pdf

ANNUAL REPORT PROTON 2006

http://www.proton.com/public/media/mediacentre/documents/annualreports/

AReport_2006.pdf

ANNUAL REPORT PROTON 2007

http://www.proton.com/public/media/mediacentre/documents/annualreports/

AReport_2007.pdf

ANNUAL REPORT PROTON 2008

http://www.proton.com/public/media/mediacentre/documents/annualreports/

AReport_2008.pdf

Chapter 2- strategy marketing Carl McDaniel, ChAerles W.Lamb and F.Hair, Jr.(2008).

introduction to Marketing (9th edition).Thomos South-Western

Financial Statement 2008 annual report

http://www.proton.com/public/media/mediacentre/documents/annualreports/

AReport_2008_5.pdf

List of Proton car models.

http://en.wikipedia.org/wiki/List_of_Proton_car_models

Malaysia’s Proton back in profit on higher sales

http://www.livemint.com/2008/05/26235421/Malaysia8217s-Proton-back-i.html

Malaysia’s Proton sets ambitious car export target

http://in.reuters.com/article/companyNews/idINBKK21192820070927?

pageNumber=2&virtualBrandChannel=0

Marketing plan From Wikipedia, the free encyclopedia

http://en.wikipedia.org/wiki/Marketing_plan

Promotion of Proton

http://www.proton-edar.com.my/indeotx.php

Proton and Lotus Top the Aussie Vehicle Sales Growth Charts

http://www.proton.com.sg/160407.html

Proton Edar

http://www.proton2020.com/about-us.asp

Proton Holding http://www.einvest.com.my/ArchiveCompanyFocus/1.%20Company

%20Focus/By%20Company%20Name/Counter%20Name%20M%20-%20Z/Proton

%2020041006.pdf