Isn’t Proton Rebadged Chinese Car?

 

The fundamental architecture, design, styling, and key EV components (e-motor, battery cells, BMS) are all developed by Chery. The Proton S70 (based on the Chery Arrizo 8) and the Proton e.mas (based on the Chery EQ7) are undeniably Chinese cars at their core. This is a known business model called "badge engineering" or rebadging. It's a faster and cheaper way for Proton to fill gaps in its lineup (especially in the critical EV segment) without investing billions in all-new R&D from scratch. 

Proton's position is that they are moving beyond simple rebadging to a deeper level of local integration and development. The cars are CKD (Completely Knocked Down), not CBU (Completely Built-Up). This means the cars are assembled in Malaysia (in Proton's Tanjung Malim plant) from boxes of parts. This process: 

   · Adds local value through labour and assembly.

   · Creates and sustains jobs for Malaysian engineers and technicians.

   · Allows for the gradual increase of local part sourcing (from the 30-40% content initially to say 80% in later years). 

But what is the cost of this strategy?

 

Source: https://commons.wikimedia.org

The most comprehensive and frequently cited study on this topic comes from the Institute for International Economics (IIE) in a 2010 report. According to the 2010 study by the IIE, the total cost of Proton's protectionism to Malaysian consumers from 1985 to 2010 was estimated at RM 33.6 billion (in 2007 Ringgit terms). This figure primarily represents the "consumer tax"—the extra amount Malaysians had to pay for cars due to high tariffs and the lack of competition that kept Proton's prices artificially high. 

The total cost to the consumer is not just the higher sticker price of a Proton. It's a combination of direct and indirect costs: 

High Import Tariffs: Taxes of up to 300% were placed on fully imported cars, making them prohibitively expensive for most Malaysians. 

Excise Duties: High excise duties were applied to all cars, but local assemblers (like Proton) received significant exemptions, further skewing the market in their favour. 

Import Quotas and Approved Permits (AP): The system limited the supply of foreign cars, reducing competitive pressure. Malaysians therefore paid significantly more for both Protons and all other cars than they would have in a free market. For example, a Proton Saga that might have cost RM 20,000 to produce could be sold for RM 35,000 because a comparable Japanese car (after tariffs) would cost RM 60,000. The consumer lost the choice to buy a better-quality foreign car at a reasonable price. 

The IIE's RM 33.6 billion figure is largely the sum of this "overpayment" by every Malaysian car buyer over that 25-year period. 

Economic Inefficiency and Misallocation of Resources 

The billions spent overpaying for cars could have been spent on other goods and services (e.g., housing, education, food, entertainment), stimulating other, potentially more productive, sectors of the economy. 

Commercial vehicles (vans, trucks) were also more expensive. This increased the operating costs for virtually every Malaysian business, from SMEs to large corporations, making them less competitive and contributing to higher prices for goods and services across the board. 

Quality and Choice Suppression 

Consumers were forced to accept. Proton was slow to innovate because it faced little competitive pressure. Without the need to compete globally on quality, standards often lagged international peers. The market offered far less choice than a similar-sized open market like Thailand or Australia. 

The Cost of "Bailouts" and Government Support 

Proton consistently required financial support from the government (and by extension, the taxpayer), including: 

·       Soft loans and direct cash injections.

·       Writing-off of debts.

·       Cost of implementing and administering the protectionist system (e.g., the AP system). 

The "Benefits" (The Rationale for Protectionism) may include: 

-Job Creation: Proton and the supporting vendor ecosystem created thousands of jobs. 

-Industrial Development: It forced the development of a local automotive parts and engineering sector (over 200 vendor companies). 

-Technology Transfer: The initial partnership with Mitsubishi provided some level of technical know-how. 

-National Pride: Proton became a symbol of national engineering capability and independence. 

Most economic analyses conclude that the costs of Proton's protectionism vastly outweighed the benefits. The RM 33.6 billion cost (1985-2010) is an estimate of the direct consumer burden. The benefits, like job creation, could arguably have been achieved at a much lower cost through other industrial policies or by fostering competition that would have forced Proton to be efficient from the start (much like how the national airline, MAS, had to compete internationally). The policy ultimately created a reliant, uncompetitive company that struggled the moment market liberalization began. Malaysia's automotive market is now more open, and Proton's survival is largely attributed to its strategic partnership and eventual majority acquisition by China's Geely in 2017. 

So, was it worth it? No, and Mahathir knew this! We are a small economy with limited sales volume (total industry volume was about 500,000 to 600,000 units for many years. Now it is reaching 800,000). To be a serious global player, we need a throughput of at least a million units (of just Proton cars). It might have been better if we had focused on a niche area of the total car market and did the gamut including the R&D.