BERLIN – Volkswagen is considering expanding production in Malaysia and has sent senior executives, including management board members, to review Proton Holdings' operations for a potential partnership, a person familiar with the matter said.
Europe's largest carmaker is considering producing vehicles at Proton factories after its partner DRB-Hicom agreed last month to buy 43 percent of the Malaysian company, the person said, declining to be identified because the talks are private.
The high-ranking executives are considering whether the plants are equipped to produce VW models as it considers creating a production hub in Malaysia to target Southeast Asian markets, the person said.
"Volkswagen is expanding because they have yet to have a big presence in Southeast Asia," Ahmad Maghfur Usman, an analyst at OSK Holdings, said by phone in Kuala Lumpur. "They can start growing their market share in countries like Indonesia and Thailand."
Volkswagen has considered a Proton partnership in the past. Most recently, the German carmaker called off cooperation talks with Proton in June 2010, after the two companies also failed to reach an agreement in November 2007 after 12 months of negotiations.
"Volkswagen continually examines local market opportunities," the company said in an e-mailed reply Thursday. "The Malaysian market in general is of high importance for the Volkswagen Group."
Mohd Khamil Jamil, managing director of DRB, couldn't be reached for comment at his office.
Selangor-based Proton was set up in 1983 by Malaysia's former Prime Minister Mahathir Mohamad to steer the Southeast Asian nation's industrialization plan. The carmaker is headed for its second year of profit declines as it struggles to compete with rivals such as Toyota.
The Proton deal gives DRB control of two Malaysian car plants with the capacity to make a combined 350,000 vehicles per year.
Vehicles produced by Proton are widely driven by taxi drivers across Malaysia and are among the cheapest cars sold in the country.
VW started its partnership last year with DRB-Hicom, after an initial deal was agreed in December 2010. The automaker also makes vehicles for Mercedes-Benz.
Under the terms of the partnership, the two companies agreed to invest about 1 billion ringgit ($332 million) to assemble Passat sedans from parts produced at other factories.
VW has been expanding global production in a bid to overtake General Motors as the world's largest automaker. Last year GM sold 9.05 million cars to VW's 8.16 million units.
VW also plans to add a factory in Ningbo, China, by 2014, adding to plants being built in Yizheng and Foshan.
Last year, a new U.S. assembly site opened in Chattanooga, Tennessee, which has helped the automaker significantly boost sales in the country.
Source: Bloomberg and Automotive News Europe