(Yicai) June 3 -- Geely Holding Group, the Chinese owner of car brands Lynk & Co, Zeekr, and Polestar, will establish a localized supply chain in Malaysia to overcome the Southeast Asian nation's high component costs, according to the founder and chairman.

Proton, a Malaysian brand partly owned by Geely, has about 30 percent higher supply chain costs than brands in China and 10 percent higher than those in Thailand, Li Shufu said recently on Dialogue, a talk show on China Central Television which zoomed in on the 50th anniversary of diplomatic relations between China and Malaysia.

The main reason for the high cost is that Malaysian suppliers of auto parts are not competent enough so the nation relies on imports, Li said, adding that the market is not big enough to realize economies of scale. At present, one of Geely’s major tasks in Malaysia is to build efficient supply chains, he added.

In April last year, the Hangzhou-based firm penned a framework agreement with DRB-HIcom, a Malaysian conglomerate that has the majority stake in Proton, to further develop the Automotive High-Tech Valley, an automotive manufacturing hub, in Tanjong Malim, a town located around 80 kilometers off Kuala Lumpur. The plan was to double Proton's local production capacity to 500,000 vehicles per year by 2035 and form a capacity of one million components per year. Geely's investment in the project was allegedly as high as USD10 billion, according to the Malaysian National News Agency.

In 2017, Geely spent CNY739 million (USD102 million) to buy a 49.9 percent stake in Proton. Since then, it has introduced technologies, talent, and management resources to the brand which sold almost 154,500 units of models such as X50, X70 X90, and S90 last year.

China and Malaysia established diplomatic relations in 1974. Over the years, the value of annual bilateral trade has surged to exceed USD200 billion in 2022 from less than USD200 million.

Editor: Emmi Laine