China carmaker Geely secures stakes in Proton and Lotus

China carmaker Geely secures stakes in Proton and Lotus

Part of the deal entails Proton selling a 51% stake in its wholly-owned British carmaker Lotus to Geely, marking its exit from the sports auto segment. Founded in 1986 as a refrigerator manufacturer, it started producing motorcycles in the 1990s and launched its first vehicle in 2002.

"There is still national pride among us enthusiasts", said Khafif Japri, president of Proton enthusiasts WiraOwnersClub.

When the deal closes in July, the company will also own 49.9 percent of Proton, which presently owns Lotus and is controlled by the Malaysian conglomerate DRB-Hicom.

The Proton tie-up gives Geely a boost in Southeast Asia, a "very hard market" dominated by Japanese brands, said Yale Zhang, managing director of Automotive Foresight, a research firm in Shanghai. "That should be the same for Proton", said James Chao, Shanghai-based Asia-Pacific chief of consultancy IHS Markit Automotive.

Proton, founded more than 30 years ago, is itself owned by Kuala Lumpur-listed investing firm DRB-Hicom (1619.MK).

Established in 1983 by former Prime Minister Mahathir Mohamad, Proton, with technological assistance from Japan, was meant to drive Malaysia's industrialization, moving the country away from its heavy reliance on agriculture.

Zhejiang Geely has reached an agreement with DRB-Hicom regarding the acquisition of a 49.9% equity stake in Proton for an undisclosed amount.

Like the taxi, Lotus could also benefit by tapping into Volvo's supplier network for less money than Lotus could negotiate independently.

Chinese manufacturer Geely's is set to take over British sports auto brand Lotus, following the firm's struggles with profitability in recent years.

Ka Leong Lo, an analyst from Kim Eng Securities said: "The partnership will give Geely access to Proton's Tanjung Malim plant in Proton City, which is now in very low utilisation". Adding Proton hardly makes Geely a rival to Volkswagen or Toyota but it does offer a little boost to Geely and Volvo's overall sales of about 1.3 million vehicles a year ago.

DRB-Hicom did not disclose whether there would be any changes, saying that details, if any, will be revealed following the signing of the definitive agreement.

Last year, it launched Lynk & Co brand to be set in the mid-market between Geely's lower-priced vehicles and Volvo.

Mohd Shanaz Noor Azam, an analyst with Malaysia's CIMB Bank, estimated that Proton may need an annual production of between 150,000 to 200,000 units to break even.