Islamic Car, Anyone ?

Proton Lost compass

Nov 15th 2007
From The Economist print edition
A stumbling manufacturer plans an "Islamic" car

MALAYSIA'S struggling national carmaker, Proton, claimed this week to have
identified a huge gap in the world's car market. It believes there is
demand for an "Islamic" car. The idea stems from desperation, but it is
not
as batty as it first seems.

Carmaking represents a big chunk of many economies. It brings jobs,
advanced manufacturing techniques and national pride. But carmakers find
it
devilishly hard to make money, especially when volumes are small. Proton
has struggled to make headway since it was created almost 25 years ago,
despite protectionism and lots of state aid.

Its position has become especially dire recently. Its domestic market
share
has fallen from over 60% to 23% in the past five years after a cut in
import tariffs, and the firm now appears to be heading for the industry's
exit ramp. It has meagre export sales of around 20,000 cars a year, which
go mostly to tiny markets such as Brunei, Nepal and Bangladesh. As a
consequence, Proton is facing mounting losses. It lost M$591m ($169m) in
the year to March on sales of barely 130,000 cars. Compared with its much
larger international rivals, Proton is a vulnerable minnow.

Hence its latest wheeze (and there have been many): a plan to build an
"Islamic" car in association with carmakers in Iran and Turkey. Iran,
which
dreamt up the idea, has a big car market with several manufacturers
building vehicles under licence from foreign firms such as Peugeot and
Renault. But, with a desire to skirt international sanctions and create
more jobs, it has long wanted a car industry of its own. It just needs
someone to provide the technology.

Turkey has not expressed a wish to create a home-grown car industry, but
it
is one of the largest Muslim car-buying markets. Together, the Iranian and
Turkish markets might give Proton a chance to achieve economies of scale.
And as demand grows in other more populous Muslim countries such as
Indonesia and Pakistan, sales of an "Islamic" car, the thinking goes,
would
surge.

But is Proton really in a position to lead such a venture? Its most
ambitious recent model, the Gen-2, was a flop. Such is Proton's desire to
remain independent<partnership discussions with various international
carmakers over the years have all foundered<that it is unlikely to be keen
to share know-how. And if indeed Proton has identified a new market, its
rivals will surely soon be on the scene. As planned, its "Islamic" car
will
feature a compass to indicate the direction of Mecca, a box in which to
store a copy of the Koran and a compartment for a headscarf. This, Proton
seems to think, is a formula that no other carmaker can match. That seems
unlikely.

----------------------------------------------------------------
This e-mail has been sent via JARING webmail at http://www.jaring.my