Volkswagen to Build Cars in Malaysia, will Start with the Passat from 2011

The Volkswagen Group on Tuesday signed an agreement with Malaysia's DRB Hicom auto group for local vehicle assembly as the Wolfsburg-based automaker seeks to expand its operations in Southeast Asia under the Strategy 2018 growth program. The announcement came after VW abandoned alliance talks with Malaysian state-owned carmaker Proton earlier this year for undisclosed reasons.

The one billion ringgit ($318 million) deal with DRB Hicom will see VW beginning the assembly of Passat models from the end of 2011 with an initial annual capacity of "several thousand vehicles." The German carmaker said it plans to build further models for the Malaysian market on the basis of a local full scale production in a second expansion phase from the end of 2012.

"Developing the market potential of the ASEAN region is of major significance for the Volkswagen Group’s long-term growth strategy," said Christian Klingler, Member of the Board of Management of Volkswagen AG. "We will be using existing structures and capacities at the DRB Hicom plant in Pekan to systematically extend our presence in the Malaysian market of the future."

The Malaysian joint venture will be Volkswagen's second in the Asean region, as the German company set up assembly operations in Indonesia for the production of the Touran in 2009