The Star Business, Saturday November 6, 2010

Rebadging – a step forward or back?

By EUGENE MAHALINGAM
eugenicz@thestar.com.my

NEXT week (Nov 10), national carmaker Proton Holdings Bhd will be launching the Inspira, which is essentially a rebadged Mitsubishi Lancer GT sedan, with some minor differences.

No doubt many are excited about the new model launch. According to a report by a local news wire, Proton had already received over 1,000 bookings for the car as at Oct 25.

However, some industry observers have criticised Proton for choosing to rebadge or go with a platform-sharing approach rather than introduce a completely brand new car into the market.

This isn’t the first time that the national car company is launching a rebadged model. As many would recall, the original Proton Saga that was launched in 1985 was based on the 1983 Mitsubishi Lancer Fiore.
Fast forward 25 years and Proton is still incorporating the same strategy. But after all this time, is it a step backwards?

An industry observer says the rebadging route is a unique way for car manufacturers that want to launch a brand new car but at the same time save costs on research and development (R&D).

“It’s a shortcut to the latest technology and design,” he says.

The Inspira is a collaboration between Proton and Mitsubishi Motor Corp (MMC) of Japan. At the soft launch of the Inspira last month, Proton group managing director Datuk Syed Zainal Abidin Syed Mohamed Tahir said it would cost Proton as much as RM700mil to develop a new car from the ground up but only half the amount via its collaboration with MMC.

Apart from cutting down on R&D costs, Proton also gets to sell the car at a much lower price. Says an analyst from a bank-backed brokerage: “It will be a big boost for Malaysians as they not only pay for a cheaper car but also get access to the latest technology.” The Proton Inspira will have a tentative starting price of RM79,888. The Mitsubishi Lancer GT, meanwhile, starts from RM120,980.

“It’s a D-segment vehicle with a C-segment price tag. Customers that couldn’t afford the vehicle previously can do so now,” says the analyst.

“The automotive industry is a volume-based game. As long as you can sell your cars, it doesn’t matter whether the vehicle is a rebadge of another product,” he adds.

Apart from this, platform sharing also means better inventory management for Proton.

“With fewer disparate components, inventory management becomes easier and more cost-efficient, allowing for resources to be freed up and used to improve products,” says the analyst.

“This also allows car manufacturers to reduce their product development and changeover duration.”
The rebadging route obviously benefits Proton, but what about MMC?

Another industry observer says that the platform-sharing concept involves purchasing rights and therefore benefits both parties.

“The company that provides the rights to use its products and technology not only gets monetary gains, but it also affirms that company’s position as a reputable car manufacturer.
“In the future, other vehicle manufacturers that are looking to rebadge will look to companies that have had successful collaborations (with other car companies) in the past.”

Companies providing their technology through platform-sharing can also now penetrate new segments that they weren’t present previously.

Examples of successful platform-sharing models include Malaysia’s own Perusahaan Otomobil Kedua Sdn Bhd’s (Perodua) Kancil, which was essentially a rebadged third generation Daihatsu Mira.
On the global front, platform-sharing examples include Peugeot and Citroen that rebadge the Mitsubishi Outlander as their 4007 and C-Crosser sports utility vehicles respectively.

However, the platform-sharing strategy also does have its drawbacks. Rebadging can result in product dilution, says one analyst. He says that if platform-sharing is widespread in many models, there will be a tendency by customers to perceive that all the products are the same.

“On one hand, this means that expensive models can be perceived to be cheaper (the Mitsubishi Lancer could be associated with Proton’s range of cheaper cars).

“On the other hand, platform sharing could increase the price of cheaper cars (due to the usage of newer and modern technology not found in similar models).”

The widespread usage of components in many models through platform-sharing also means that there is a greater chance for vehicle recall if there is a defect in a particular (widespread) component, he says.

PROTON : [Stock Watch] [News] Related Stories:

Proton MD’s vehicle end-of-life policy proposal received a lot of brickbats

Used car sellers hit by margin squeeze

2010 car sales performance in major Asean markets

Revving it up

Calls for faster liberalisation

END OF ARTICLE. That's all folks, thanks for having the time and patience to read this blog entry.