Volkswagen inks deal with Malaysia's DRB-HICOM

Europe's biggest automaker Volkswagen is to join forces with DRB-HICOM, one of Malaysia's largest car distributors and importers, to assemble and manufacture cars in the country, a report said on Sunday. Volkswagen inked an agreement Friday with DRB-HICOM to roll-out Volkswagen vehicles at its Pekan manufacturing facility in central Pahang state, the Edge business newspaper said.

The announcement comes after national carmaker Proton in June said it had scrapped alliance talks with the German company, a move expected to dent Proton's attempts to secure export markets.

Mohamad Khamil Jamil, DRB's group managing director said DRB-HICOM hoped that the entry of Volkswagen into Pekan would help it to become a regional automotive hub.

'This memorandum of understanding is the culmination of intense discussions and both parties anticipate the production of the Complete Knock Down (CKD) models in Malaysia,' he said.

Production of Volkswagen models in Malaysia is expected to start in 2012.

Pekan is DRB-HICOM's largest automotive manufacturing facility in Malaysia. The company also assembles cars from Honda and Mercedes-Benz.

Proton has been searching for a collaborator in a bid to break into foreign markets and develop attractive models to compete with growing competition from Japanese, European and Korean carmakers in its domestic market.

Proton was formed in 1983 by then-premier Mahathir Mohamad as part of an ambitious national industrialisation plan. But it has suffered from a reputation for unimaginative models and poor quality.