Proton Plays China Card - from thetycho.com
Many motor industry observers were puzzled when Proton announced a deal to export its Gen2 to China. The question uppermost in most people's mind was "Why would a Chinese car company want to buy Proton cars for resale in its domestic China market?"
It's no secret that the car would be re-branded but the depths of the re-branding exercise were not plumbed.
To get the perspective, it must be remembered that there are about 200 car brands in China, domestic as well as imports and joint ventures. The total industry volume is seven million passenger car sales a year, 8.9 million if commercial vehicles are included.
The picture becomes clearer when you understand that Proton's importer is China's biggest maker of luxury buses and high-end trucks.
Yes, this company, the Jinhua City, Zhejiang Province-based Young- man Auto Company (Youngman), has a joint venture with Stuttgart- based Neoplan Bus, widely regarded as a premium coach designer and manufacturer with an output of 2,000 buses a year, occupying 70 per cent of the luxury bus market in China.
Youngman also has a joint venture to make MAN trucks and this is not surprising since this is the parent company of Neoplan, buses of which are popular with major airport authorities.
What's important is that Youngman's boss, the self-made Pang Qing Nian who didn't finish schooling, never mind not speaking or understanding English, believes in the power of branding.
"There are many good manufacturers out there, but to be a great manufacturer we need to do something that can change the world," the Youngman chairman was reported to have said at the signing of a joint venture with Santa Rosa, US-based Zero Air Pollution (ZAP) electric vehicle company, last February.
"I have built Youngman group based upon three key principles: quality product, technology and brand."
To answer the puzzle, it's all about branding. The Proton Gen2's design and engineering has major inputs from Lotus Engineering.
So the Proton Gen2 has a completely new brand in China, and this brand is EuropeStar. The Gen2 was supposed to have been called Racer, but this name was taken, and instead substituted with RCR.
On the boot end is the most important badge of all - Lotus Engineered.
Lotus therefore is the 200-something brand in China, one of the most brand-conscious nations in the world. And it's a very powerful brand too because people still remember the awesome history of Lotus founder Colin Chapman, his seven Formula One victories, and the current Lotus products like the new Europa, the Exige and the venerable Elise.
And it's very logical too because Youngman pays US$50 (RM156) a badge royalty for the Lotus Engineered badge. This is all money in the bag for Proton, the owner of Lotus.
The game doesn't end here though. Lotus engineers are retained to consult the Chinese carmaker and the mission now is to improve the interior fittings - the quality of the plastics.
"We sell about 30 RCRs a month and the customers like the ride and handling. What they don't like is the interior. Our buyers compare with Toyota and other Japanese imports," said Wang Ping, sales deputy general manager of the Hengzhou Kang permanent auto sale service limited company.
"Our solution then was to provide leather upholstery. We're working on improving the interior." The RCR is priced between US$17,800 and US$20,500.
Youngman has initially appointed 40 dealers to support the launch in terms of managing its sales, service and spare parts operations for the EuropeStar brand in China.
The logic of working with Youngman and the developing of the China market had earlier been expounded by an industry sage.
At that time, the talks with Volkswagen had just been declared over, and this wise one said that one good way for Proton would be to develop the China market, and to do a reverse take-over, i.e. sell suitable Proton models to China, localise the content and then import the high quality, low-cost components for the Malaysian market.
Towards this end, the first step was for Youngman to source high quality interior components from manufacturers in China. Once this supply chain was established, Proton would import these high quality, low-cost parts.
In areas where Malaysia still had advantages in volume and quality, for example engine heads, Youngman would continue to import.
The next Proton model for the China market is the Persona and this will also be rebranded EuropeStar. The specific model name is to be announced.
Lotus will provide Youngman with consultants to help with design work for several new models that will be launched under a new brand over the next five years. Lotus has already worked on projects with Youngman spanning the last two and a half years, and now the firm will help with the establishment of an all new brand.
Youngman is not the only Chinese manufacturer calling on the talents of Lotus Engineering. The company is already working with several clients in both China and India including Nanjing Auto, which will be re-launching the MG brand.
Last September, Youngman signed a joint venture agreement with ZAP to manufacture, market and distribute electric and hybrid vehicles for the passenger car, truck and bus markets. The new joint venture company will also focus on the development and manufacturing of electric charging.
The strategic partnership with ZAP will allow the joint venture company to bring highway capable electric and hybrid vehicles to the market like the ZAP-X crossover SUV.
"This is the most significant relationship that ZAP has ever entered into," said ZAP chief executive officer Steve Schneider.
"This joint venture will provide a platform for both ZAP and Youngman to focus each other's strengths to develop solutions that have the potential to transform the industry. Our energy will not stop at the vehicle engineering level. Using renewable energy to provide a cost effective recharging infrastructure to customers, we can change the world, one vehicle at a time," said Schneider.
The Youngman Automotive Group Co. Ltd
* Based in Jinhua City, Zhejiang, China
* Controls 70 per cent of the luxury motor coach market
* 1 million square foot manufacturing facility in Jinhua
* 4,000 employees, 700 R&D staff
* 7 new vehicle factories under development
* With new production facilities, capacity to produce 200,000 vehicles per year
* July 2007 - Youngman signed contract with Malaysia's Proton