Volkswagen weighs car assembly option in Malaysia

 

KUALA LUMPUR/ HAMBURG: German carmaker Volkswagen is exploring the possibility of building cars in Malaysia with local carmaker Proton Holdings.

"In May, Volkswagen agreed to assemble vehicles with a local partner in Indonesia in what was a first step to expand our activities in the Asean market," a VW spokesman said yesterday.

"Over the long term, these investments in Indonesia are not sufficient to serve the entire Asean market. Local production in Malaysia is therefore a further option in this strategy." The spokesman said no decision had been taken.

Proton was not available for comment.

A Malaysian newspaper reported the partnership talks were not expected to see VW take a stake in Proton, a move it tried before. Instead, the two are considering assembling cars for VW at Proton's plant in Tanjung Malim, Perak

Proton shares have risen 17 per cent in the past week on speculation the company, whose market share has fallen in recent years, was close to securing a foreign partner.

VW, which believes the 10-member Asean region offers "enormous" growth potential, attempted twice to form a strategic alliance with Proton as early as 2004 only to see talks break down in November 2007.

Seeking another way to get a foothold in the region, VW decided to begin building Tourans in Indonesia after teaming up with Indomobil Group, the country's largest car company and parent to Volkswagen's exclusive Indonesian distributor PT Garuda Mataram Motor.

Efforts to serve the Asean market are complicated by big differences between markets, with Thais mainly buying pick-ups, while MPVs are popular in Indonesia and motorbikes in Vietnam.

Furthermore, import duties of up to 100 per cent for vehicles coming from the European Union allow sustained growth only through local assembly.

Rewards for successful entry into the market could be significant, with 570 million people living in the Asean realm where car ownership is a fraction of that in Western nations.

Instead of the 500 cars per 1,000 inhabitants in countries like Germany, there are only 49 in Indonesia or 146 in Thailand by comparison, an industry body said last month. - Reuters