Volkswagen's Malaysian venture

A long anticipated initiative is coming to fruition following Volkswagen's announcement of an agreement with Malaysian company DRB Hicom to build cars in the south east Asian nation.

Things haven't gone exactly according to plan. Back in 2007 Volkswagen was reported to be considering the partial or full acquisition of Proton. Within a year the German automotive giant had officially announced the cessation of talks with Proton and its owner, the Malaysian government.

Another Malaysian company, DRB Hicom, which is known for assembling Honda and Mercedes-Benz models, was a former stakeholder in Proton and, as recently as a year ago, was understood to be entertaining the idea of re-acquiring a share in Proton. 12 months on from then, the music has stopped -- with Proton the company left standing.

DRB Hicom has now confirmed it will not take a share in Proton, but has entered into an agreement with Volkswagen instead. The two companies entered into a memorandum of understanding back in August and have now formalised the arrangement, according to a press release issued yesterday by Volkswagen. Within the terms of the agreement, DRB Hicom will build the Passat on Malaysian soil for VW from the end of next year.

"Developing the market potential of the ASEAN region is of major significance for the Volkswagen Group's long-term growth strategy," said Christian Klingler, Member of the Board of Management of Volkswagen AG with responsibility for Sales and Marketing.

"We will be using existing structures and capacities at the DRB Hicom plant in Pekan to systematically extend our presence in the Malaysian market of the future."

Roughly 12 months on from the commencement of Passat production, other VW models will go into CKD assembly, starting at a rate of several thousand a year and building from there.

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