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Proton looks for UK recovery

This year Proton’s sales are up by 3% at 1,341 units. It’s a significant resurgence for a company that saw sales peak at 15,000 units in 1992 but then steadily fall to a low last year of 1,754 (3,100 including Jumbuck), due in part to an over-ambitious pricing strategy.

In 2003, Proton UK managing director Brian Collier set out bullish plans to raise sales to 8,000 in 2004 and 15,000 this year. He now concedes those targets were too optimistic given that Proton was building a new production plant in Malaysia. Delays in its completion affected supplies of all cars, including new models.

“We have suffered from a lack of new product and, therefore, a lack of product spend on advertising,” he says. “Satria was on run out and supplies ended in the middle of last year – it was our second biggest seller. We will not get the replacement until the end of this year at the earliest.”

Collier also points to delays in receiving the new four-door Wira, but says product supply is starting to improve. “Missing these two cars has been the issue with us missing targets,” he adds. “But the plant is now up and running and we now expect fewer delays.”

Production did not ramp up quickly enough to prevent delays on the Savvy compact hatchback, however. Originally due in September, its launch has now been put back to early November. That means Collier’s 2005 sales target of 4,000 units will be missed. “It was hard to be precise on sales when supplies were uncertain,” he says.

#AM_ART_SPLIT# Despite the problems, dealers have, with few exceptions, remained loyal. The 70-strong network averaged around 40 new car sales each last year, but made up revenue shortfalls by controlling used cars.

Proton enjoys robust customer loyalty – its JD Power performance ranks it second on service – with 70-80% retention, which means cars generally return to the network. This, together with a strong focus on parts and servicing/repairs, has helped dealers average impressive return on sales of just below 3%.

“Next year we will have our new models in place, and that’s something we are really looking forward to,” says Collier. “It will be our year zero.”

Gen2 has been a success, achieving 55% conquests, with Ford and Vauxhall targets. It is helping Proton bring down the average age of customers from the traditional 55-plus to people in their 40s, and dealers have sold 750 in the first half of the year. The 1.3-litre model has just been launched, which should become the volume seller.

Key to growing UK sales will be expanding the retail network. Proton is close to appointing six more retailers, and is processing applications from another nine. By year-end it wants a network of 100. Open points include London (Proton considered a showcase centre with its Lotus sportscar and Augusta motorcycle subsidiaries, but it was too costly), Manchester, Liverpool and central Leeds.

Attractions to newcomers are the low set up costs, typically £7,000-8,000, support from the factory, which includes funds to cover marketing and stocking costs, and, says Collier, a model launch plan that includes five- and seven-seat MPVs within two years, second-generation Impian hatchback and a four-door Gen2 to replace the poor selling Impian saloon.

The Jumbuck pick-up will be discontinued mid-way through the year, mainly because it uses a Mitsubishi engine where Proton wants to use its own. It is likely to be replaced by a Gen2-based pick-up.

#AM_ART_SPLIT# The franchise is ideal as a dual brand or replacement for MG Rover, and while Proton admits to being in talks with one large retail group, it has no plans to mirror Kia by targeting plcs.

With 100 dealers, the new Savvy – targeting a new section of the market for Proton – and supplies of Satria and Wira, Collier is confident of hitting 5,000 sales next year, equating to 50 cars per dealership.

“Most of our dealers are profitable because they are owner-drivers with low overheads and their own premises,” he says. “We need them to get to a situation where they are selling 60-70 cars a year. This needs a move away from value to volume focus, especially with new cars like the Savvy.

“It’s important to get new dealers on board who will also bring in new customers. They will also increase our exposure with customers.”

As the network matures, so Proton recognizes the need to introduce more support programmes. It has just launched a used car warranty scheme and has plans for a full used car programme. “We expect to launch a programme next year,” says Collier. He also intends to switch some resources from regional press ads to national campaigns as the network expands.

Next year, Collier hopes to add another 20 dealers, taking the network to 120 and putting the majority of the UK population within the target 20-30 minute drive time.

“It’s a tough market, particularly as most of our sales are from the private market. But a lot of our dealers are better placed to handle a downturn because of their strength in used cars and aftersales business,” says Collier.

“We’ve had our problems with delays, but our dealers have seen our product plans, our new factory in Malaysia and the investment we are making. They are confident about the future.”

After a successful launch in the UK which saw sales peak at 14,000 in 1991 (not on this graph), Proton suffered in the late Nineties from pricing issues and supply shortages

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