While the rumour has been squashed by Geely, expect market talks of Proton doing CKD operations in Thailand and Indonesia to intensify in the coming years, because there is no other way to get around both countries' import tax barrier.
Without CKD operations in Thailand and Indonesia, it won’t be possible for both Proton and Geely to achieve their lofty 400,000-unit export target that was announced back in 2019.
Take Thailand for example. Without local assembly, the imported Proton X70 cannot be priced competitively against rivals like the Haval H6, MG HS, and Honda CR-V – all of which are manufactured in Thailand.
Indonesia takes it a bit further, as they are very protective of their local manufacturing industry. The archipelago does it by limiting the import of cars to roughly 100,000 units a year. With this import cap in place, Proton cannot expect its sale to be any better than the Perodua Myvi, which is sold there as the Daihatsu Sirion and is capped to roughly 3,000 units annually.
For Proton to be competitive in markets such as Thailand and Indonesia, local assembly in those countries are definitely needed. We understand that there have been no submissions made to Thailand or Indonesia as yet, hinting that CKD may not happen so soon.
The interim solution is to rely on the ASEAN-China Free Trade Agreement. Under the ASEAN-China Free Trade Agreement, Geely can import battery electric vehicle (BEVs) into Thailand without incurring any tax. Last year, roughly 1,000 EVs were sold in Thailand.
Over the next couple of years, Proton’s ageing Shah Alam plant will be closed down and production work will be concentrated in Tanjung Malim.
At the moment, Proton has several plants outside of Malaysia responsible for local assembly, including in Pakistan and Kenya. Thus, it’s not too far-fetched for Proton to set up plants in Thailand and Indonesia in an effort to boost its export numbers.