PROTON CLARIFIES STATEMENT BY PEKEMA

PRESS

Posted on Feb 13, 2018

Subang Jaya, 12 February 2018– PROTON would like to respond to the article entitled, Pengedar Bumiputera Proton
Tertekan that was published on 11 February 2018 by Utusan Malaysia. We would firstly like to thank PEKEMA and its
members for highlighting issues faced by its members as it gives the Company an opportunity to address the challenges
faced by its dealer network.

The search for a Foreign Strategic Partner
Addressing the article specifically, PROTON acknowledge the tough challenges it faced over the preceding years. Since
2000 a decline in market share and sales volume had affected the ability of the Company to finance its research and
development activities, which led to falling behind its competitors in terms of technology and product competitiveness. It
also indirectly affected investments in developing the network, staff and manufacturing abilities of the Company.

In its efforts to address the decline, PROTON tried various approaches ranging from platform sharing with other brands
to developing its own engines and transmissions to reduce dependence on imported parts. While these actions brought
about positive results, none were able to arrest the continuing decline in sales and market share that were apparent both
in Malaysia as well as in foreign markets.

Therefore, the need for a Foreign Strategic Partner quickly became more apparent if PROTON wanted to stage a
recovery to its former position at the head of the Malaysian automotive market. It would also help in our aspirations to
grow the brand both locally and abroad, which is a key thrust for the future business plans of the Company.

Following an exhaustive search that had taken a considerable amount of time, Zhejiang Geely Holding Group Co. Ltd.
(Geely) was identified as the most appropriate foreign strategic partner. Due to their global reach, aggressive business
strategy and the ownership of other automotive brands, most notably Volvo Cars, it would allow for the sharing of
technologies and quick expansion of the brand that would put PROTON back at the forefront of the automotive industry.

The steps taken to engineering a turnaround
It was decided that the recovery of PROTON in Malaysia would encompass a number of areas. Among the areas
involved would be an improvement of the dealership network, the introduction of a new model range over the next few
years and an increase in customer satisfaction via an improved sales and service experience.

The improvements to the dealership network would be in line with the practice of other brands in Malaysia, where the
majority of their dealers sell from 3S/4S outlets. Of the PROTON outlets currently in the nationwide network, about 70%
are 1S facilities where the dealers only sell vehicles without offering any after sales servicing. This is a far higher
representation of such dealers than other popular brands, which limits the ability of PROTON to offer a premium
customer experience

PROTON CLARIFIES STATEMENT BY PEKEMA

Due to the lack of 3S/4S outlets, PROTON’s Sales Satisfaction Index (SSI) and Customer Satisfaction Index (CSI)
scores have suffered as compared to other automotive players. With a plan in place to increase the number of such
outlets, it is expected that both SSI and CSI scores will grow along with a corresponding increase in sales.

These new outlets will go hand-in-hand with the launching of an all-new range of PROTON models that will bedeveloped with infusion of advanced technology. These initiatives will push PROTON further, introducing new groups of
customers to the brand who may have been considering competitor products previously.

Addressing statements brought up by PEKEMA
Relating specifically to the statements brought up by PEKEMA, PROTON would like to address these statements in
order to explain the development of its business model.

• With regards to the lack of time given to dealers to upgrade their 1S outlets to 3S/4S outlets, dealers are
encouraged to upgrade their outlets over a period stretching from 2018-2020. The target for 2018 is to substantially
increase the number of 3S outlets located nationwide, which will enhance overall customer experience with the
introduction of our new models beginning 2018. Currently the 3S/4S dealerships nationwide, is equivalent to only
30% of our total dealerships.

PROTON CLARIFIES STATEMENT BY PEKEMA
PROTON recognizes that a substantial sum of money needs to be spent by the dealers on this exercise. Therefore,
we introduced a special scheme that offers upfront support to assist dealers in upgrading to brand new premises.
Additionally, these dealers will enjoy extra margins on cars sold for up to three years.

• In the past, our dealers enjoyed a 4% margin based on a monthly volume of 40 units agreed with PROTON to
qualify for their sales incentives. We have now revised the scheme by lowering the threshold to encourage overall
business growth for dealers. This scheme is in line with current challenges faced by dealers and PROTON will
continue to monitor the situation to ensure business growth is achievable. In addition, PROTON also provides
quarterly incentive scheme throughout the year, where dealers can earn extra income by exceeding their sales
targets. PROTON also provides state incentive support for on-ground activities by dealers.

• The industry practice in Malaysia is for automotive companies to demand cash before delivery or to provide dealers
with up to 14 days of credit terms. Considering the competitive situation faced by its dealers, PROTON extends this
period for up to 60 days with certain terms and conditions. This is a special effort offered by PROTON in order to
help facilitate dealers to manage their cash flow as they strive to conclude sales. By doing so, dealers will have
additional time to move their current stocks without worrying about their accounts being blocked.

• The Payment After Registration (PAR) system is not practiced by other automotive companies in Malaysia.
PROTON has decided to end the scheme in order to ease the Company’s tight financial situation. Currently,
PROTON finances a total of RM650 million a year for its dealers. If we continue to practice PAR, the amount
payable to PROTON by the dealers will grow resulting in a negative effect on our cash flow.

• In order to promote sales to corporate fleet customers, PROTON extends special packages to interested corporate
customers, associations, organizations and institutions, subject to certain terms and conditions. Dealers are
encouraged to focus on retail sales as corporate fleet sales make up a very small share, which accounts for less
than 5% in total Proton car sales in 2017.

• With reference to the issue of unhealthy competition between dealers, we wish to reiterate that the new margin and
incentive schemes referred to in item 2 above is also meant to prevent disorderly marketing amongst the dealers.
PROTON is also guided by the laws and regulations of the country such as the Anti-Competition Act.

• Upon the signing of the strategic partnership agreement, PROTON established a 10-year business plan focusing on
key elements comprising products, operations and sales growth. Detailed studies have been carried out leading to a
comprehensive product strategy for the introduction of new models over the next five years. Due to the infusion of
advanced technology, expertise and capital of our partner, we are confident that PROTON is on the path towards a
turnaround and sustainable growth.

PROTON CLARIFIES STATEMENT BY PEKEMA

• The new SUV, which will be launched by end of the year, will be positioned as a technological landmark of
PROTON. As it will be positioned as PROTON’s premium model, the sales and servicing experience will be carefully
managed to exceed customer expectations. Therefore, PROTON’s 3S/4S outlets will manage the sales of the SUV
exclusively. However, 1S outlets will still be allowed to sell the SUV via the 3S/4S outlet closest to their location.
Ultimately all dealers will have the opportunity to sell new models as long as all requirements are met.

It is recognized that PROTON and its networks of dealers have come a long way. Therefore, PROTON reiterates its
intention is to prosper instead of to burden the dealers. The journey is long-haul; it is a must for PROTON, dealers and
business partners to first excite and serve the market the best we can. In conclusion, PROTON hopes and aspires to grow
the business with its dealers, creating confidence in the public and enhancing brand perception with renewed customer
experience. Moving forward, the business model of PROTON must focus on market requirements that are sustainable in
the long-term.

PROTON CLARIFIES STATEMENT BY PEKEMA

About PROTON

PROTON Holdings Berhad is 50.1% owned by DRB-HICOM Berhad and 49.9% by Zhejiang Geely Holding Group Co. Ltd.
Established in 1983, it is the only full-fledged OEM car manufacturer that is complete with research and development (R&D)
facility in South-East Asia and was established with three primary national policy objectives, which are, to spearhead the
development of component manufacturing industries, to acquire and upgrade technology and industrial skills within the
automotive manufacturing industry and to strengthen the international competitiveness of Malaysia’s industrial capability.

1985 marked a momentous year in Malaysia’s history when the country’s first national car, the Proton Saga, rolled out for
the masses. Since then, its offerings include versatile and reliable four-door family vehicles such as the Saga and Persona,
stylish executive sedans such as Prevé, the elegant executive D-segment Perdana as well as spacious and affordable multipurpose
vehicles
like
the
Exora
and
Ertiga.

There
is
also
the
sleek
sporty
Suprima
S
that
is
packed
with
performance
and

the
bold
and stylish
Iriz
than
emphasises
safety
and
is
the most
affordable
5-Star
ASEAN
NCAP
car.

PROTON is more than just a car company as its inception as a key driver of national development has seen the brand
accelerate its learning curve through technology transfer with strategic partnership and technical collaborations. There is no
doubt that it has helped grow the Malaysian economy through its progress and success in the automobile industry.

By listening to the needs of customers, PROTON cars are now steadily on track to achieve the mission for the future, with
PROTON set to become a marque which builds quality and safe cars with passion and soul; cars that are enjoyable to drive
– and a pleasure to own. For more information, visit http://www.proton.com.

For further information please contact:

Group Corporate Communications Division, PROTON