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VW signs an agreement to produce cars in Malaysia

By Rigval on 30 Dec 2010

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-2011 Jetta -

Volkswagen Group (VW) has finally signed an agreement with a Malaysian company to manufacture its cars in Malaysia. The partnership with DRB-HICOM (DRB) will be a joint venture agreement with DRB holding a 70% stake in the venture while VW the remaining 30% and the total investment of this would be around RM1 billion. It will enable VW to manufacture cars in Malaysia as well as throughout South East Asia.

What will happen firstly is that the local assembly of the 2011 VW Passat and 2011 VW Jetta models will start rolling out of DRB’s factory in Pekan, Pahang by the fourth quarter of 2011 and later the smaller Polo thereafter. A 40% localization of parts is the set target for the Pekan assembled VWs in the near future. This deal is a coup in some ways for DRB as their facilities in Pekan can assemble close to 100,000 units yearly and at this moment less than half of the capacity is utilized. As VW hopes to assemble and sell between 40,000 and 50,000 units yearly, the factory is clearly suited for the job at hand.

One reason why VW chose Malaysia is that the country’s car market sells over 570,000 cars annually and is one of the largest passenger car markets in this region (even with local tariffs protecting local manufacturers). It is purely logical in a business point of view for VW, which is market leader in Europe to expand in this ever growing South East Asian region. I suppose with Thailand’s motor industry investments being filled with Ford, Mazda and especially Toyota, VW chose Malaysia as its S.E.A. stepping stone.
The Agreement between VW and DRB was signed on 21st of November 2010 in the presence of the Prime Minister of Malaysia Datuk Seri Najib Tun Abdul Razak.

The prices for VWs in Malaysia range from RM109,000 for the Polo 1.2TSI and onwards. If VW can sell the Polo at say, RM90,000 they could see sales of this decent but slightly underwhelming looking car (especially in white with skinny 15inch wheels) move up a little. But not by much as if it looked like a Polo GTI with 17inch rims and slightly more trimming, things would look better. Of course, VW also stated that with local content, prices would eventually be competitive. So only time will tell.

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Written by Rigval
Born in 1972. Married with a kid. Loves B-road drives and have driven cars from the 1950s to date.

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