Geely to Acquire 49% Stake in Proton

Chinese automaker Geely Holding has agreed to buy struggling Malaysian manufacturer Proton from DRB-Hicom, beating out rival bidder French PSA Group.

Geely Holding, which controls Geely Automobile and Volvo Cars, will acquire 49% of Proton, sources close to the company told Reuters. Proton also controls British sports car maker Lotus.

The group earlier asked for trading in its shares to be suspended pending an announcement.

Proton, founded in 1983 by former Malaysian premier Mahathir Mohamad, received 1.5 billion ringgit ($338.2 million) in government aid last year on condition that it pursues a turnaround plan and seeks a foreign partner.

Other potential bidders for the brand included PSA, the Paris-based maker of Peugeot and Citroen cars, its domestic rival Renault and Japan’s Suzuki Motor Corp.

Proton re-badges cars from foreign manufacturers to sell in the local market, but its quality has declined in recent years. The company has two Malaysian plants with an annual capacity of 400,000 cars, currently running far below maximum output.

The car company also has a stalled assembly deal with local Iranian car company Zagros Khodro; however, since the local firm sold a majority stake to local car rental firm Azim Khodro no new vehicles have re-entered the market.

Meanwhile, Geely recently signed a deal with Bam Khodro to launch production of the Geely GC6 sedan in Kerman Province.

Geely’s investment would help Proton expand its sales overseas and recover some of the global presence it has lost in recent years, people familiar with the bidding process told Reuters.

By offering some of its own technology, Geely hopes to lift Proton sales in right hand-drive markets including Malaysia, the United Kingdom, India and Australia, they said.

The success of midsize Geely models such as the GC9 sedan and Boyue SUV helped to increase the brand’s China sales by 50% last year to 765,851 vehicles.