DRB-Hicom inks collaboration agreement with VW to assemble CKD cars in M’sia

(The Edge) KUALA LUMPUR: DRB-HICOM BHD [] has entered into a collaboration and license agreement with Volkswagen AG (VW) and Volkswagen Group Malaysia Sdn Bhd (VGM) to collaborate in the assembly of Volkswagen vehicles in Malaysia.

Under the agreement, VW has granted DRB-Hicom the the exclusive, non- assignable and non-transferable right to assemble selected completely knocked down (CKD) VW models with VW’s specifications and quality requirements in Malaysia.

For its part, VW will supply CKD kits and provide relevant engineering and technical support to enable DRB-Hicom to assemble the CKD models and their parts.

DRB-Hicom will then sell the products exclusively to VGM’s subsidiary for onwards distribution and sales, and it will also import completely built-up VW brand passenger cars which in turn would be sold to VGM’s subsidiary.

DRB-Hicom said on Tuesday, Dec 21 that by becoming an exclusive assembler of selected models of VW brand passenger cars in Malaysia, the collaboration would allow it to expand its vehicle assembly and component manufacturing activities and further strengthen its position in the local automotive industry.

“The collaboration will also allow the group to participate in VW’s future export programme for certain Volkswagen brand passenger cars to the Asean market,” it said.

The company said the collaboration expenditure would be funded by internally generated funds and bank borrowings.

DRB-Hicom said the parties had agreed that the collaboration’s expenditure would not exceed €133.7 million.

When I was traveling in China, the streets were full of Volkswagen cars. Volkswagen has done a wonderful job there. Will it be able to duplicate the success in Malaysia or South East Asia?

Malaysian market is getting too crowded. For a start, they will bring in Jetta and Passat and aim to install capacity of 40-50,000 which is about 8% market share(tough to achieve this number overnight). It will not have immediate impact on Proton sales except may be Proton Perdana. They are more in direct competition with our so called "Proton" upgrader. It will have more impact on Vios, City, Camry, Accord, etc. To some extend it will give Naza a fight in Peugeot's CKD cars or Mercedes C class.

Volkswagen builds very solid quality car. However, they need to overcome some perception issue as most people still perceive European cars are not as reliable, fuel economy as Japanese car. Many also think the maintenance cost is high. You will be surprised if you talk to some of Volkswagen owners. If they give you 5 years guarantee. I will can tell you they are extremely competitive. If they can survive in China market, I can tell you that these guys are good.

They are very smart not to bring in Polo or Golf which they have to wrestle with perception of lower CC will be underpowered. What they have done with their TSI technology is wonderful. I think they have done a wonderful job and live up to what they claim frugal and fast. Need justification? Nevermind, I will tell you this story another day.