Proton’s acquisition of an 80% stake in Lotus in October 1996 is well known, but why did Malaysia’s first carmaker initiate the deal? At Lotus Cars Malaysia’s 30th anniversary celebration recently, Tengku Tan Sri Mahaleel Tengku Ariff, former CEO of Proton, shared his insights into the deal that transformed the company.
In his account, Mahaleel said ten days into his tenure at Proton in 1996, he was asked to present to then prime minister Tun Dr Mahathir Mohamad on April 30 a strategic plan with the intention of making Malaysia a developed nation. To be specific, the goal was to create Malaysia’s first homegrown model that was developed by Malaysians and built locally.
“I presented to Mahathir for an hour. After that, he never asked a single question. I said, on the last page, we can do the old way, which is rebranding, take somebody’s brand and stick a Proton [logo] on the backside or the front and you call it our Malaysian car,” said Mahaleel.
“The other is to do it yourself. And that critical day in the morning, he made that decision: we make our own car. When we make our own car, in one of the charts that I put up, was to go through a consultancy, which is not only costly, but you do not get the know-how because all consultants keep 20-30% of know-how hidden from us. So, you cannot access it,” he continued.
“If you acquire a company, you can go straight into the database of what the company has. The two companies that were chosen was, at that time, Porsche and Lotus. Why do this?” he added.
According to Mahaleel, Lotus not only had passenger car know-how but also knowledge gained from competing in Formula One. The latter wasn’t Porsche’s strong suit, and the German outfit wasn’t for sale, which meant Lotus was essentially the leading and only option. Decades ago, Lotus went through tumultuous times after the death of founder Colin Chapman in 1982 and multiple ownership changes (General Motors and Romano Artioli).
Following the acquisition of Lotus where Proton purchased an 80% stake for 51 million British pounds, Mahaleel revealed that Proton also secured Michigan Motor Research and MV Agusta. “We now had within the group, we can test powertrains, we can do Formula One, we can do passenger cars and engines, and we have motorbikes,” he said.
“We eventually had almost 2,000 research engineers worldwide. And don’t ever underestimate that Lotus saved Proton, per project about half a billion ringgit,” he added.
Continuing, Mahaleel said sometime in April that year, he was tasked to develop Malaysia’s first homegrown car and have it roll off the assembly line in the year 2000. He noted that this was a challenge, as Mitsubishi, which Proton partnered with to rebadge earlier models, analysed Proton and found that the local company could only do drawings and clay models.
“We have no know-how in crash testing, electronics, engine management systems, making the engine, we had no know-how. However, within three years with the help of Lotus and the other companies we bought, we were able to launch the car, Waja, and became the 11th country in the world that could make its own car,” said Mahaleel.
The Waja was indeed the first Malaysian-designed car, but it still used a Mitsubishi platform, specifically a modified version of the one found in the Carisma (also shared with the first Volvo S40). Proton later introduced its own platform with the Gen 2 in 2004, together with its own engine, the CamPro.
He added the Chinese companies such as Geely and Chery had approached Proton for a partnership at the time because the Malaysian carmaker was looking to go to China. However, Mahaleel said this did not go through because this was a national project that isn’t just about making a car but creating empowering Malaysians with the know-how.
On how Proton benefitted from Lotus, Mahaleel said Lotus was unique in that its cars were very lightweight thanks to the revolutionary chassis it developed made of extruded aluminium sections joined by adhesive and rivets.
“During that time, three of the European engines that were designed for different brands were Lotus engines. Do you know that the CamPro is a very unique engine? You don’t know. There’s a variable valve timing,” said Mahaleel.
Despite Lotus itself mostly using Rover/Toyota engines at the time, it did make its own engines before. Lotus Engineering was a popular powertrain development consultancy firm in that era, even working with Porsche on its VarioCam Plus system. Lotus’ patented Cam Profile Switching tech (a variable valve timing system) formed the basis of Proton’s CamPro and later CPS engines. CamPro remained in production in various forms (including the turbocharged CFE variant) until the end of 2025, last used in the Persona, known as the CamPro VVT.
Mahaleel went on to reveal that Proton was developing a hybridised Wira in 1997 and that the company was experimenting with hydrogen cars. He said that a Wira hybrid never came to market because the cost of the hybrid battery was too high at the time and that Malaysia lacked the raw materials. He added that a Wira hybrid would have retailed for almost RM80,000 or RM90,000, which would not attract many buyers.
On the flipside, Lotus learned from Proton how to assemble cars properly, particularly when it comes to speed. Proton learned how to produce vehicles quickly not just from Mitsubishi but also Toyota for the just-in-time production system.
“Lotus, they say we lose money. Lotus saved us half a billion ringgit per car. Because Mitsubishi, one platform, charges us RM500 million. We design it, it belongs to us. We can sell this platform to some other people,” said Mahaleel.
He went to say that Proton and Lotus engineers engaged in knowledge transfer, with the former group spending more time to learn from the latter. This includes car design, with Mahaleel namedropping Azlan Othman, current chief designer for Proton, as being one of the “students” that spent time learning from Julian Thomson, the designer behind the Elise and Exige.
“By and large, within three years of this acquisition, this deep knowledge was the key success factor for Proton because they could access and work together,” said Mahaleel, who added that he formed a global team and not just purely a Malaysian one.
“We made RM1.3 billion three times during my time. The highest before my time was RM300 million odd per year. In case you do not know, every car project was paid with cash, no borrowing, zero. We paid the government debt of RM1 billion. It was paid up two years earlier. We bought Lotus cash. We bought MV Agusta cash. We bought Michigan Motor Research cash,” recalled Mahaleel.
In the end, Proton owned 100% of Lotus by 2003, and in 2017, DRB-Hicom (by then the parent company of Proton) sold 51% of Lotus to Geely, while the remaining 49% went to Etika Automotive, a Malaysian company.
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AI-generated Summary ✨
Comments generally express skepticism about Proton’s purchase of Lotus, viewing it as a costly, unprofitable venture that failed to deliver value. Many criticize management missteps, quality issues, and Proton's reliance on protectionist policies instead of competitiveness. There is a consensus that Proton's past efforts under Mahaleel and protectionism hindered growth, and recent comments lament the decline of Proton’s quality, innovation, and market position, with some advocating for opening the market to foreign brands.