Proton Expects ‘Increasingly Challenging’ Malaysian Auto Market

Nov. 27 (Bloomberg) — Proton Holdings Bhd., Malaysia’s state-owned carmaker, said its home market will become “increasingly challenging” in a global recession, as the company set aside funds for higher material and component costs.

Proton spent more money making cars than it generated in revenue selling them in the three months to Sept. 30, it said in a statement to the stock exchange in Kuala Lumpur today. Income from servicing vehicles pulled the company into profit.

The carmaker needs to produce automobiles on a larger scale to compete globally after scrapping talks last year for a partnership with Volkswagen AG, analysts have said. Malaysia’s government expects domestic economic growth to drop to 3.5 percent in 2009, the slowest pace in eight years.

“On the international front, the impact of the global financial and economic crisis and the volatility of foreign currency markets is expected to further deteriorate the business environment,” Proton said.

Fiscal second-quarter profit jumped to 43.8 million ringgit ($12 million) from 3.51 million ringgit a year earlier after the company released new models. Sales climbed 41 percent to 1.838 billion ringgit, Proton said. Operating expenses rose 38 percent to 1.839 billion ringgit.

Proton said it made 53.4 million ringgit in “other operating revenue,” mostly from servicing cars. The company didn’t specify how much it set aside for higher material costs.

Shares of Proton have fallen 51 percent this year while Malaysia’s main stock index has dropped 40 percent.

To contact the reporter on this story: Angus Whitley in Kuala Lumpur at awhitley1@bloomberg.net

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