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Volkswagen Signs Deal To Build Cars In Malaysia

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Volkswagen Signs Deal To Build Cars In Malaysia

By Viknesh Vijayenthiran


December 21st, 2010


Volkswagen’s attempts to crack into the Malaysian market date back all the way to 2006, with the automaker on several occasions trying to ink a deal with state-owned Proton. Now, finally, Volkswagen has signed an agreement to produce its vehicles in Malaysia, starting with the new Passat at the end of 2011.

Volkswagen will be working closely with Malaysia’s DRB Hicom, using its existing structures and capacities including a plant in Pekan. DRB Hicom currently owns the largest automotive production network in Malaysia and builds passenger cars and commercial vehicles at its plants in Pekan and Melaka.

Note that the cars built by Volkswagen in Malaysia will rely on Completely-Knocked-Down kits; essentially completed modules shipped from Germany and then pieced together to gain local production status. It’s a strategy that several other foreign automakers, including BMW and Mercedes-Benz, utilize to partially circumvent Malaysia’s ridiculously high tarrifs.

Annual production will range around several thousand vehicles, with this figure scheduled to increase each year.

Today’s announcement is a crucial step in Volkswagen’s plan to become the world’s biggest automaker by 2018. To achieve such a feat the automaker will need to gain a foothold in the expanding Southeast Asian market, and now it appears that it has done just that. What it doesn’t mean, unfortunately, is that we’re not any closer to seeing the new Passat in local showrooms.




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By Andrew Ganz

Volkswagen announced this morning that it has reached an agreement with local authorities to build its Volkswagen Passat sedan in Malaysia beginning late next year.

VW says that it is fully committed to expanding its presence in Malaysia and throughout Southeast Asia’s ASEAN member states. The automaker intends to begin by producing complete knock-down – or CKD – Passats in late 2011 before beginning full scale production and assembly about a year later with its local partner, DRB Hicom.

The German automaker has not announced any plans to export Malaysian-built cars to markets outside of Southeast Asia, although the relatively low labor costs could spell eventual plans for exportation.

VW’s announcement is one of several expected in the coming months following efforts by the Malaysian Investment Development Authority to convince automakers to open assembly plants in the country.



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Volkswagen to Build Cars in Malaysia, will Start with the Passat from 2011



The Volkswagen Group on Tuesday signed an agreement with Malaysia's DRB Hicom auto group for local vehicle assembly as the Wolfsburg-based automaker seeks to expand its operations in Southeast Asia under the Strategy 2018 growth program. The announcement came after VW abandoned alliance talks with Malaysian state-owned carmaker Proton earlier this year for undisclosed reasons.

The one billion ringgit ($318 million) deal with DRB Hicom will see VW beginning the assembly of Passat models from the end of 2011 with an initial annual capacity of "several thousand vehicles." The German carmaker said it plans to build further models for the Malaysian market on the basis of a local full scale production in a second expansion phase from the end of 2012.

"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. "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."

The Malaysian joint venture will be Volkswagen's second in the Asean region, as the German company set up assembly operations in Indonesia for the production of the Touran in 2009



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