KUALA LUMPUR: DRB-HICOM Bhd has officially tied the knot with Volkswagen AG (VW) in a collaboration worth a potential RM1bil to manufacture VW cars at the DRB-HICOM plant in Pekan.
“It’s a substantial amount and will span a period of time. The initial investment will be in respect of infrastructure and the substantial part of it (investment) will be consumed within the first three years,” DRB-HICOM group managing director Datuk Seri Mohd Khamil Jamil said at a press conference after the signing of the collaboration and licence agreement yesterday.
He said the cost would be spread 70% and 30% respectively between DRB-HICOM and VW. “But VW will also bring in intangible investments that will benefit the local automotive industry.”
Christian Klinger, VW’s member of the board of management for sales and marketing, said there were plans to manufacture about 40,000 to 50,000 VW cars a year at the plant.
At the signing ceremony. From left: DRB-HICOM chairman Datuk Syed Mohamad Syed Murtaza, Datuk Seri Mohd Khamil Jamil, Prime Minister Datuk Seri Najib Tun Razak, Volkswagen Group China vice president for sales and marketing Wei Ming Soh, Christian Klinger and International Trade and Industry Minister Datuk Seri Mustapa Mohamed.
According to Khamil, the Pekan plant has a maximum capacity of 96,000 vehicles a year.
“To date, our capacity is about 25,000 to 30,000 (units) per annum, so there’s still a lot of space to accommodate VW. Expansion beyond what we can produce is a possibility. If needed, we will look at the possibility of acquiring further land to accommodate VW,” he said.
On the potential impact on DRB-HICOM’s financials, Khamil said the collaboration would benefit the group in the medium to long term.
Both DRB-HICOM and VW are looking at starting production of the VW Jetta and Passat models in the fourth quarter of 2011.
By virtue of yesterday’s agreement, VW will transfer the knowhow for the assembly, testing and quality assurance of the models. The models will first be offered in Malaysia and then to other Asean countries.
Klinger hinted that VW hoped to produce as many models as possible at the Pekan plant.
Khamil said DRB-HICOM and VW would embark on an aggressive programme to achieve local content of as much as 40%, going forward.
He said both parties would identify suitable local vendors, not only to supply parts and components for the local assembly but also to look into the global supply to VW operations.
Khamil declined to reveal how much cheaper the new VW models would be, now that the vehicles would be built locally.
Apart from VW cars, DRB-HICOM also distributes and assembles foreign marques such as Audi, Mercedes-Benz, Honda, Suzuki, Mitsubishi, Isuzu and Mahindra.
Khamil said it was premature to say if DRB-HICOM would consider manufacturing Audi vehicles. Audi is a subsidiary of the VW group.