Volkswagen Local Assembly Deal Finalised; CKD Passat & Jetta Coming From End 2011

Volkswagen and DRB-Hicom have put pen to paper an exclusive collaboration and license agreement for the local assembly of the Passat sedan and the Jetta sedan at DRB-Hicom's plant in Pekan, Pahang, following the signing of a Memorandum of Understanding (MOU) in August. DRB-Hicom is expected to invest 70 percent and Volkswagen 30 percent in a deal worth RM 1 billion.

Production is slated to begin in the fourth quarter of 2011 with the Passat before the Jetta. A second expansion phase is planned from the end of 2012, when the Polo Sedan is said to be a likely candidate to join the local lineup. The prices and specifications of the confirmed Passat and Jetta models were not revealed yet.

Volkswagen intends to start producing several thousand vehicles per year, increasing that figure to around 40,000 to 50,000 vehicles over time. DRB-Hicom's plant in Pekan has an annual production capacity of 96,000 vehicles. With the current annual production level at only 25,000 to 30,000 vehicles, there is plenty of excess capacity.

Both Volkswagen and DRB-Hicom would work together to identify local vendors able to supply quality parts and components, which would contribute to the targeted 40 percent local content. As part of its Strategy 2018 growth plan, Volkswagen would supply the Malaysia-assembled vehicles to other ASEAN countries, while locally-sourced parts and components that meet Volkswagen's stringent standards would be included in its global supply chain.