Would This Be On Your Shopping List?

Brilliant brainchild or plainly batty?

Malaysia's national carmaker Proton Saga recently said it plans to team up with companies in Iran and Turkey to produce an "Islamic car." The distinctive features of the car? It will have a compass pointing to Mecca, and compartments to hold the Quran and a headscarf.

Enough rude remarks have been dumped on this project, but really, I am skeptical of how this will lift the fortunes of a company that is clearly struggling. The Economist tries to rationalise it:

"Together, the Iranian and Turkish markets might give Proton a chance to achieve economies of scale. And as demand grows in other more populous Muslim countries such as Indonesia and Pakistan, sales of an “Islamic” car, the thinking goes, would surge."

If this is the argument for a religious car, would we soon see a Christian or Buddhist car? Highly doubtful. For one, the standout features of such a car - the compass and special compartments - are really pretty replicable. For another, would consumers really choose such a car over one that boasts higher quality, more safety features and greater fuel economy?

Probably aggressive marketing and advertising can save the day, but that's resources that Proton can ill-afford. After import tariffs were cut, its domestic market share fell to 23 percent, from about 60 percent five years ago.

It reported a loss of $169 million in 2007 on sales of barely 130,000 cars. With measly export sales of about 20,000 cars a year, Proton is aggressively trying to raise exports and boost sales.

Attempts to put a new rev in its engine by tying up with foreign partners have also hit a snag. This week, Proton said it has called off talks with Volkswagen and General Motors on a possible alliance, because it believed it was out of the woods with the launch of a moderately successful car model. It's a foolhardy move. As one analyst puts it:

"Proton lacks global competitiveness as it has a poor brand image, has no real global presence to speak of and lacks the necessary technology to compete against other carmakers."

In our Global Economy class, the concept of comparative advantage has been drilled into us. A country should produce a good that it has superior productivity and innovation in. In the cut-throat car industry, this is most visible.

We see Indian and Chinese carmakers racing to produce the small car with the lowest cost, Japanese auto giants dreaming up vehicles that meet the highest green and safety standards. Acquisition talks to leapfrog markets and gain technological know-how, like the one between US' Ford Motors and India's Tata Motors, are underway.

Why should I care about Proton anyway? As nationalistic barriers fall in emerging economies in Asia, long-protected companies face the onslaught of global competition. A wild idea is great, but only if it creates a real sustainable advantage.