Volkswagen and DRB-Hicom Sign Agreement
Volkswagen and DRB-Hicom have signed an agreement for local car assembly in Malaysia, making way for VolksWagen to gradually expand its activities in Southeast Asia. The signing in Kuala Lumpur, which follows the Memo Of Understanding signed by both parties in August 2010 aimed at investigating the possibility of local car production, was done in the presence of PM Datuk Seri Najib Tun Razak. Volkswagen new Passat and Jetta saloons have been identified as the 1st VolksWagen cars to be assembled here, with production of the passat slated to begin from the end of next year at DRB-Hicom’s plant in Pekan, Pahang. The choice of engines and variants levels were not announced.
Diversified Resources Berhad Heavy Industries Corporation of Malaysia Berhad(DRB-Hicom) stated that the operation is not to be seen as that of contract manufacturing, but rather a JV, with a significant involvement in the deal, which is worth around RM1 billion – the planned ratio of DRB-Hicom’s investment is 70 percent, with VolksWagen injecting the remaining 30 percent. Pekan has a capacity to around one lakh vehicles annually, and current capacity is just around a 3rd of that, so there is plenty of space in line with the new plans, though a significant amount of investment will be put in for infrastructure construction and product planning, among other things needed for the new partnership. Localisation in the assembly will certainly be an impetus, and the aim is to work towards a fourty percent local parts ratio on the Veedubs made in Pekan – VolksWagen will assist DRB in this localising aspect and help to identify suitable vendors, with everything have to meet the tight quality control that VolksWagen is known for. All this will move towards not just providing VolksWagens for the local market, but for export as well. “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. He added that the Malaysian automobile market in particular, where more than 570,000 vehicles were sold in this year, played an important role in the Group’s strategic planning. “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,” Klingler added. Plans are afoot to build further Volkswagen models for the Malaysian market on the basis of a local full scale production in the 2nd expansion phase, from the end of 2012, with the Volkswagen Jetta scaled for then, and it will likely be joined by the Volkswagen Polo. This Completely knocked down assembly will have an initial annual capacity of several thousand vehicles and will be successively increased, and VolksWagen is looking at a figure of around 40,000-50,000 cars built annually, though that will be some time in the future.