Product Development Investment And Product Image

Product Development Investment And Product Image

Attaining Cost Leadership and differentiation: Product development investment and product image

Proton needs to take measures like developing domestic technology, and rapidly launching new products and attaining cost leadership. In order to come up with new products, to achieve its target of development in speed, cost effectiveness, product appeal, and better ride and handling in its models, Proton needs to produce its own-design car, having invested a large amount in R&D capabilities to create its own product brand- the Waja (GX) model. The aim of this strategy is to produce models that will compete in the same space as imports that qualify for tariff reduction under AFTA. 

As a result, Proton has abstained from the use of existing Mitsubishi or Citroen chassis to design its own platform. With the exception of engines and transmissions, everything else is done in-house in terms of design engineering, and manufacturing. The Waja model made its debut in September 2000 after 1.7 million man-hours of R&D effort over a three year period and an investment close to RM1 billion. A hefty RM600 million alone was spent to develop the platform for the Waja. It was the first Proton model to be largely designed and engineered in-house. The Waja’s high local content is perceived to be able to greatly reduce the company’s foreign exchange outflows and royalty payments. 

Approximately RM400 million (US$105 million) would be saved on foreign exchange outflows by minimizing the import content for the car and a further RM500 million on royalty payments over the life-span of the product. In addition, Proton could earn as much as RM450 million in foreign exchange inflows through exports. The car meets Euro III emission levels and new EU impact regulations (40% offset deformable barrier crash and 50km/h-side impact). Consistent with the introduction of the Waja 1.6 version, Proton planned the production of the next models beginning with the extended version of the Waja, GXM scheduled production in mid 2003. Although, it is not yet clearly decided, Proton is thinking to replace its Wira range of passenger cars. Proton may still retain the Wira brand name but only following a substantial increase in the import of Malaysia’s engineering expertise involving the use of Proton’s own camshaft profile (campro engines). The move will be a departure from Proton’s practice of producing and branding variants of the Mitsubishi Lancer model for the Malaysian market. By using the Malaysian Campro engine, costs can be brought down by between 20-30 percent. The current Wira models consist of about 60 percent of imported components, including gearshift and engine parts.