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Malaysia is a spoilt child with three F1 teams

Malaysia with a GDP of USD7000 per capita should apply for the Guinness world record for having three F1 teams in the F1 racing.

– Petronas
– AirAsia
– Proton

No other countries can beat Malaysia for such a crazy involvement in the F1 racing.

Malaysia Boleh ! Boleh to bankruptcy !

Proton’s Lotus F1 gamble

Corporate Portrait – By Eugene Mahalingam

Analysts uncomfortable with the national carmaker’s direction

PETALING JAYA: Proton Holdings Bhd recently made headlines when it announced that its five-year strategy to turn sports car unit Group Lotus plc to profitability could cost up to 480mil (RM2.37bil).

According to a statement by the national car company to Bursa Malaysia last week, the projected capital expenditure (capex) would be financed via internally generated monies and “externally secured” funding which includes the recently-inked sponsorship agreement of Formula One (F1) race team, Renault F1 Team Ltd.

In a nutshell, Proton will be leveraging off Renault F1’s expertise and F1, the pinnacle of motorsports, as a platform to build the Lotus brand.

Such a move is not unprecedented. World renowned car manufacturers such as Ferrari and Mercedes have benefited significantly through F1 – a fact that Proton Holdings Bhd group managing director Datuk Syed Zainal Abidin Syed Mohamed Tahir has attested to.

“If you look at all the other OEMs (original equipment manufacturers) like Ferrari and Mercedes, F1 has a direct impact on their marketing and branding,” he was quoted in a StarBiz report earlier this month.

Ferrari, despite being a car manufacturer, does not resort to conventional advertising methods such as television commercials to create awareness of its brand.

Proton’s subsidiary, Group Lotus plc has bought a major equity stake in the Renault F1 team which will be renamed Lotus Renault GP team from the start of the 2011 Formula season onwards. With the acquisition, Group Lotus will become the title sponsor over the next several years. Picture shows a model of the Lotus Renault GP racing car. — Bernama

It does that through F1, which serves as a platform for both brand promotion and research and development. A lot of solutions that are in its road cars are tested and developed through F1.

F1, meanwhile, has allowed Mercedes-Benz to showcase the latest state-of-the-art technology in its road cars, such as its SLR McLaren roadster, which uses carbon fibre-reinforced plastics for its monocoque (passenger cell), the same material used in a conventional F1 race car.

The entry of Proton into F1 clearly seems to indicate that it too is looking to follow the path of Ferrari and Mercedes.

In its statement to Bursa Malaysia last week, the company said the move into F1 would pave the way to quickly incorporate new technologies from F1 cars into Lotus road cars, including hybrid technology, Kinetic Energy Recovery Systems (KERS), aero advancements and lightweight materials.

The national carmaker, which acquired a major stake in Renault F1 from Genii Capital, added that the partnership would also bring non-F1 technologies such as lightweight braking systems, variable compression engine technology and onboard software systems.

Group Lotus chief executive officer Dany Bahar, who was commercial & brand senior vice president for Ferrari, said at a press conference earlier this month that motorsports would be the key to building the Lotus brand, adding that F1 participation was part of its broader motorsports and marketing strategy.

“F1 is a more economical way and it is highly visible.

“There’s constant action for eight months thoughout the year and is viewed by some 500 million people around the world,” he was quoted as saying.

While F1 has been beneficial to some, it has been a recipe for disaster for others.

Japanese auto giants Honda and Toyota were both victims of the global financial crisis and the high running costs of an F1 team, and eventually pulled out of the sport last year.

On the bright side, F1’s governing body, the FIA, and the Formula One Teams’ Association (FOTA) have constantly been pushing for cost-cutting measures that not only helps the existing teams, but also encourage the participation of new players.

It also helps that Proton is buying into an established F1 team and not building one from the ground up.

However, skeptics feel that the RM2.37bil to turn around a car company is too high. One analyst said the amount revealed was a shocker.

“The amount could be better utilised for better purposes, such as acquiring other technologies or even other companies.”

Maybank Investment Bank in its recent report also said the amount was “higher than expected.”

“We do not share Proton’s direction of spending for the F1 whilst most major automakers have already exited the circuit in recent years.

“The high capex will dent Proton’s war chest and affect cash flows, impacting its business and financial turnaround plans

“Proton was in a net cash position of RM1.2bil as at September.

“Whilst we do not think it will face new funding difficulty, Lotus’ huge capex needs will significantly drain its cashflow over the next five years and deplete its war chest,” it said.

The research house added that the venture into F1 is unlikely to boost Lotus’ car sales any time soon.

“We are also not particularly excited over Lotus’ involvement in F1 Renault.

“It will incur high marketing expenses (for branding exercise) but reap minimal returns. On sales volume, Lotus has no new product to offer until 2012.”

Earlier this month, Syed Zainal was quoted as saying that if ever there was a perception that participating in F1 was going to drain Proton’s resources, the answer was it would not.

Many will certainly argue that it would be unfair to compare Lotus to the likes of Ferrari, seeing as the Italian powerhouse is undoubtedly in a league of its own.

Some may even liken the comparison (between Lotus and Ferrari) to David and Goliath.

But than, we all know how that match ended, right?

Ultimately, the success of Lotus’ venture in F1 will depend on the ability of Renault F1 to secure victories on the F1 circuit.

It’s teams with the most victories that global sponsors will want to associate with.

The comment board with Facebook account.
Ting says:

Correction. Malaysia only has one team which is Lotus Cosworth. The three “teams” you mentioned above are “sponsors”.

But I agree with you that no other countries can beat Malaysia for such a crazy involvement in the F1 racing.

nkkhoo says:

They are all major sponsors with their company name printed clearly on the car chassis. They are not just a sponsor, Petronas involved in engineering development like in lubricant oil R&D for their F1 team.