China's Geely Said to Buy Stake in Malaysian Carmaker Proton

Earlier headlines on sale of Proton

Earlier headlines on sale of Proton

With the purchase of Lotus, Geely could take advantage of the British marque's expertise in lightweight technology and composite materials for their future vehicles.

In what might represent the concerns over Proton, Citi, for one, noted that the deal would improve the valuation of the seller, raising its target price for DRB-Hicom's shares to 2.30 ringgit from 1.86 ringgit, keeping a Buy/High Risk call on the stock.

After years of dwindling sales and financial losses, it is hoped that finally now, Shufu is the man who would work his "magic" in reviving Proton as he did with prestigious Swedish auto maker Volvo.

Geely also owns the London Taxi Company.

The tie-up will give Geely, based in the eastern Chinese city of Hangzhou, the ability to produce right-hand drive vehicles and access to a 3.2 million-vehicle market in Southeast Asia.

Last year, Proton received RM1.5 billion in government aid on the condition that it pursued a turnaround plan and seek a foreign strategic partner. "We will have potential of half a million cars in Malaysian and ASEAN markets by working with Proton".

"This deal gives Geely an already-established distribution network", said Yale Zhang, head of Shanghai-based consulting firm Automotive Foresight.

Proton is in something of a holding pattern in Australia as its stockpile of 2016-plated cars - built before more strict emissions standards for petrol engines were introduced late a year ago - dwindles. Alongside that 49 per cent stake, Geely will assume control of Lotus, taking a 50 to 75 per cent slice of the Norfolk based auto manufacturer.

Proton was nationally held but was privatized in 2007 to Malaysian conglomerate DRB-Hicom, whcich is owned by tycoon Syed Mokhtar Al-Bukhary.

Geely, which also owns Sweden's Volvo Cars, is keen to expand beyond its Chinese home market.

DRB-Hicom now owns 100 per cent of the manufacturer of the first national auto.

With the Proton deal, Geely said it can develop a beachhead in Southeast Asia.

As part of the deal, Geely will also buy 51 percent of United Kingdom carmaker Lotus from Proton for 51 million pounds (US$66.2 million).

Both parties expect to sign the "definitive agreement" for the deals before the end of July.

As Geely's owner, Shufu owns 100 per cent of Volvo, yet many might not be aware that the owner hails from China. The carmaker only exported 301 units previous year.

Geely's founder Li Shufu, sometimes referred to as the "Henry Ford of China", is a self-made entrepreneur who started building cars in 1998.

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