China carmaker Geely is taking a stake in Malaysia's iconic, but long-struggling Proton

Proton Holdings Saga vehicles move along the assembly line at the company's factory in Shah Alam, Selangor, Malaysia.
Goh Seng Chong | Bloomberg | Getty Images

Chinese automaker Geely will be taking a 49.9 percent stake in Malaysia's iconic, home-grown, but long-struggling carmaker Proton.

Malaysia's DRB-Hicom, Proton's parent, and Zhejiang Geely Holding expect to sign the deal by the end of July, a statement from Geely said.

"Geely Holding is full of confidence for the future of Proton, we will fully respect the brands history and culture to restore Proton to its former glory," Daniel Donghui Li, Geely Holding's chief financial officer, said in the statement.

Neither Geely nor DRB-Hicom provided the value of the deal.

The deal will mark the culmination of at least a decade of attempts to marry the politically sensitive Proton with a foreign carmaker, with GM and Volkswagen both walking away at different times.

Janet Lewis, head of Asia industrials research at Macquarie, said the reported deal was a "lifeline" for Proton.

"Its recent sales were reportedly just 150,000 units and there's no way any automaker can expect to survive in the mass market with that low a volume," she told CNBC Wednesday.

Geely, including its Volvo brand, ranked just 16th globally on World Car Group's ranking by sales.

"It really doesn't have the scale that it needs to be continuing to invest in the technologies that they need," such as driver-assistance and electric systems, she said.

"To the extent that Proton adds another leg to them in offering opportunity in the Asean (Association of Southeast Asian Nations) market as well, it would be good for the Geely Group."

Proton, founded in 1983, sold 25,000 units in the January-to-April period, up 5.5 percent on year, according to a report from Malaysian brokerage Affin Hwang.

The deal will include Zhejiang Geely Holding, parent of Geely Automobile and Volvo, acquiring a 51 percent stake in British sports-car brand Lotus from Proton, the Geely statement said.

For Geely, the deal likely isn't just about a brand or factories.

Geely will be buying into a potential advantage in the region. Malaysia, one of Southeast Asia's largest carmakers, is part of the Asean Free Trade Area (AFTA), which has reduced or eliminated tariffs on autos in the region, with a complete phase-out expected.

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