This article first appeared in The Edge Financial Daily on July 17, 2017 - July 23, 2017

KUALA LUMPUR: Perusahaan Otomobil Kedua Sdn Bhd (Perodua), which recorded a 2.4% year-on-year increase in vehicle sales for the first six months of 2017 (1H17), does not deny that it feels “threatened” by the joint venture between Proton Holdings Bhd and China’s automotive powerhouse Zhejiang Geely Holding Group Co Ltd (Geely).

However, it iterated that competition “comes from everywhere” and not just from the Proton-Geely alliance, which is expected to bring loss-making Proton — and also Perodua’s direct competitor in the national front — back to profitability.

“Of course, we feel threatened but not just by the Proton-Geely partnership,” said Perodua president and chief executive officer Datuk Dr Aminar Rashid Salleh. “It is typical of companies to feel intimidated and protective of their markets. But we feel threatened all the time as competition comes from everywhere.”

“We have seen auto players who were not in the same [vehicle] segments as us slowly encroaching into our segments. This is why we put [certain transformation strategies and initiatives] into place to stay relevant in the market and to defend our market share,” added Aminar.

Rather than being too defensive, Aminar said Perodua as a national carmaker has “social responsibilities” to enhance the domestic automotive ecosystem and is not just focused on making profits.

“Nevertheless, we wish Proton all the best as the new partnership forged with Geely would continue to improve the ecosystem. And hopefully, together with Perodua, we can enhance the ecosystem further and have a relatively higher combined market share in the national segment,” he told reporters at a business performance review last Friday.

Perodua posted sales of 99,700 vehicles in 1H17, compared with 97,400 units a year earlier. Sales for the period was spearheaded by Perodua Axia, accounting for 32,600 units or 32.7% of overall Perodua sales.

As for exports, Perodua said it shipped 1,854 vehicles to other countries in 1H17, a decline of 30% from 1H16. The drop was due to lower demand for its vehicles from the Indonesian market, it said.

Apart from Indonesia, Perodua exports its models to Sri Lanka, Singapore, Fiji, Brunei and Mauritius.

Perodua is targeting total sales of 202,000 units for 2017. It estimates total industry volume at 284,200 units for 1H17, which would translate into a market share of about 35.1%.

“Despite the improvement in sales, we foresee that the tighter lending guideline is still by far our greatest challenge to overcome as most of our customers are first-time buyers,” Aminar said.

In May, Perodua said that hire purchase approval rate for the brand was below 50%. Asked if there has been any improvement or decline in the rate, Perodua Sales Sdn Bhd managing director Datuk Dr Zahari Husin said: “It is around that range but not getting better. Managing the situation so the approval rate won’t decline further is our toughest challenge now.

“What we have been doing lately is talking to our front liners and sales advisers, advising them to diligently filter customers [based on their credit ratings] so we can have better approvals when we submit the loan applications to the banks,” Zahari added.