MALAYSIAN AUTO INDUSTRY NEWS: Pekan gets RM300 million investment from DRB-Volkswagen Deal

The project will see total investment nearing RM1 billion

DRB-HICOM board members and VW representatives
fielding questions after the signing ceremony

The Royal Pahang town of Pekan can count itself as the home of yet another famous German marque comes 2012 as DRB-Hicom and Volkswagen has inked a deal to assemble the Jetta and Passat at the Malaysian conglomerate’s sprawling auto industry complex there.

The deal will include building a RM300 million facility to build the cars and according to DRB-Hicom Managing Director Datuk Seri Mohd Khamil Jamil, the plant will be a modern and highly robotised factory, necessary to ensure the highest quality standards set by Volkswagen can be met.

VW Jetta will be born in Pekan Soon

He said that the investment will include two assembly lines, one each for the Passat and Jetta the two models that are expected to enter the Malaysian market in the final quarter of 2011 if all goes to plan.

Speaking at the signing ceremony, Prime Minister Datuk Seri Najib Razak said that the Polo could also be built there in the future.

VW Passat will also be made locally

The Jetta competes in the C-segment sedan market with the Honda Accord and Toyota Corolla Altis while the Passat would fight in the lower D-segment together with models such as the Honda Accord, Toyota Camry.

While there are no price indicators yet, it is fair to expect the locally assembled variants to take a competitive position against popular cars in their respective segment.

Under the current deal DRB-Hicom will shell out about 70 per cent of the investment with VW topping up the rest.

VW Board member 

for sales and marketing

Christian Klingler

represented the company

at the signing ceremony

The Pekan complex has the capacity to produce around 96,000 cars but it is currently cranking out about 36,000 cars per year.  The VW project will eventually see them churning between 40,000 and 50,000 VWs when in full swing.

Ultimately they expect to see 400 per cent local content put into the locally assembled VW cars and to achieve this DRB-Hicom and VW will have to develop a vendor programme to ensure that Malaysian suppliers are competent to deliver parts at the expected quality level.

Under the agreement, DRB-Hicom would buy the knocked down packs from VW, assemble them and re-sell to Volkswagen Group Malaysia which is the local franchise holder.