Financial Strain on Proton Suppliers Threatens Automotive Industry Chain

More than a hundred parts suppliers and vendors associated with Proton Holdings Bhd are facing severe financial strain due to escalating operational costs. Despite efforts by the Proton Vendors Association (PVA) to engage with the national carmaker regarding their challenges, appeals have gone unanswered, leading to a precarious business environment for suppliers.

According to NST,  Datuk Liu Guoquan, president of the Malaysian Fujian General Chamber of Commerce, suppliers are grappling with decreased orders, resulting in financial instability. Proton’s failure to meet promised quantities of parts orders for its models, including the X50, X70, and X90, has led to a production output reduction of 30% to 50%, exacerbating the situation for suppliers.

The financial strain faced by suppliers poses a significant threat to the automotive industry chain, potentially affecting approximately 50,000 employees. Many vendors are experiencing financial losses and some are forced to cease operations altogether, raising concerns about the industry’s sustainability.

While Proton has been contacted for comment, no response has been issued yet. However, it is understood that the company is preparing to address the matter. Despite mounting losses for suppliers, Proton has shown reluctance to acknowledge and rectify the issue, further straining its relationship with the vendor association.

2022 Proton X70 1.5

Liu criticised Proton’s decision to import competitively priced locally assembled (CKD) parts from China, attributing it to Malaysian suppliers’ reluctance to reduce prices. Such actions have deepened tensions between Proton and the vendor association, exacerbating the challenges faced by suppliers.

The increase in electricity bills and the government’s minimum wage hike to RM1,500 from July 1 last year have compounded financial difficulties for suppliers, particularly small and medium enterprises (SMEs). These challenges hinder capital investment, expansion plans, and human resource strategies, further jeopardising suppliers’ financial stability.

An anonymous supplier disclosed that Proton’s failure to meet promised order volumes has led to significant financial losses. Despite original contracts promising supply for 1,500 units of the X90 per month, actual orders range between 200 and 300 units monthly. This shortfall burdens suppliers with expenses related to production machinery, manpower, and overheads.

The financial strain faced by Proton suppliers underscores the urgent need for dialogue and resolution to safeguard the automotive industry chain. Proton’s failure to address suppliers’ concerns not only jeopardises their financial stability but also poses a threat to the broader automotive ecosystem. Effective collaboration and support mechanisms are essential to mitigate the challenges faced by suppliers and ensure the industry’s sustainability.

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