According to a report by Bloomberg, Malaysian investors say the time is now for government-owned Proton Holdings Bhd. to sell its stake in Lotus Group International Ltd.

According to a report by Bloomberg, Malaysian investors say the time is now for government-owned Proton Holdings Bhd. to sell its stake in Lotus Group International Ltd.

Reports of Lotus' sale to Genii Captial and Shanghai Automotive Industry Corp. have been speculated and denied in recent months, but Proton's recent profit drop of 76 percent in the last quarter has prompted investors like Gan Eng Peng, who is head of equities at HwangDBS Investment Management Bhd and manages approximately $3.6 billion in assets, to bolster reports that the Malaysian government may sell its stake in Proton.

As a result, the path of least resistence for Proton is to shed its struggling sports car maker. Gan says, "It will make sense for them to sell it. Proton and Lotus are not a good fit. They are in different market segments, both in terms of geography and product." Selling Lotus would allow Proton to refocus on its domenstic market by investing in production facilities as pressures from competitors such as Toyota and Perodua increase.

Lotus Chief Executive Officer Dany Bahar, a former Ferrari executive, showed an unprecedented six concepts at the Paris Motor Show in 2010 that outlined the company's future product line. The impressive display of exotic sports car designs and technology wowed the media and enthusiats alike, but made industry experts skeptical. A very ambitious and expensive plan indeed, but Bahar says the plan will see the company breaking even by 2014. In a recent interview Bahar said, "Without the funding support and the guarantees given by the Proton group, we would not survive, end of story."

Since Proton purchased the British niche sports car brand in 1996, Lotus has never turned a profit. Malaysian stockbroking firm OSK Holdings Bhd. estimates that Lotus needs 2.4 billion ringgit (~$760 million), triple its current value, to be profitable. Once profitable, the brand is still only worth about 1 billion ringgit (~$316 million), according to OSK analyst Ahmad Maghfur Usman. But to break it down even further, Lotus will have to sell 8,000 vehicles a year to be profitable compared to the 1,985 units Lotus sold in the past year. Moreover, as a point of reference, Ferrari will post record sales of 7,000 vehicles this year.

 

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