Volkswagen group’s expansion into Malaysia continues to gather pace despite the widely reported announcement by CEO Bernd Pischetsrieder at an investor conference in Michigan earlier this month that the German carmaker has scrapped plans for a strategic joint venture with Proton – Malaysia’s first national carmaker.
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The widely accepted reason for abandoning the joint venture was a disagreement over equity holdings.
The announcement was a harsh blow to Proton, which is finding the struggle to survive in an increasingly accessible Malaysian car market tougher by the day. Its domestic market share has shrunk from around 65-70% just a few years ago to around 27% in 2005. Immediately after Pischetsrieder’s announcement Proton’s share price plummeted by almost 20%.
Since then, local reports in Malaysia have suggested that Volkswagen had already incorporated a local subsidiary, called Volkswagen Malaysia, back in mid-December 2005 and that an official corporate launch had been scheduled for February.
The report in The Edge weekly financial publication – which cited an unnamed local Volkswagen Malaysia official, also suggested that the new subsidiary would be headed by Axel Barth – formerly the head of Volkswagen’s Asia-Pacific sales operations.
Volkswagen is also said to have signed up Quasar Carriage, its Malaysian Skoda distributor, as the leading main dealer for the Volkswagen brand. Import and distribution would be handled by Volkswagen Malaysia, according to The Edge, which also suggested that Volkswagen is now in talks with an unnamed local conglomerate for the assembly of “certain” Volkswagen car models.
Separately, executives operating in Malaysia’s automotive manufacturing industry have told just-auto that Volkswagen and Proton have resumed joint venture talks following a softening of Proton management’s stance on ownership. Clearly the longer Proton goes without a clear long-term strategy, the stronger Volkswagen’s negotiating position will become – unless a rival bid emerges.
For the moment, the hot talk has it that Proton management may be prepared to accept Volkswagen as majority shareholder and thus give the German car company management control. But other assurances are being sought, according to industry sources. These would include the preservation of the Proton brand – at least domestically. Volkswagen has successfully managed multi-branding strategies elsewhere with products that share the majority of their content, namely in the VW, Seat, Skoda and Audi joint platform programme.
Malaysia remains the largest passenger car market in South East Asia and is undoubtedly the most attractive from any European carmaker’s point of view. Proton’s Tanjung Malim plant north of the capital Kuala Lumpur, which currently only makes the Gen2 model, could prove to be a good base from which Volkswagen could launch a regional offensive. A regional product sourcing strategy similar to what GM has developed with its Korean GMDAT subsidiary may still be on the cards for Volkswagen, particularly if both sides are prepared to compromise.
Tony Pugliese
