Having recently hooked up with firms like BYD and Suzuki, Volkswagen is continuing its rampage across the developing world’s markets, as Reuters reports that the VW’s leadership is in talks with the Malaysian state-owned (42 percent) automaker Proton. VW had previously sought an alliance with Proton, but talks broke off without an agreement in 2007. According to Bloomberg BusinessWeek, VW is not likely to take a stake in Proton despite last year’s policy shift by the Malaysian government allowing foreign firms to own majority stakes in mainstream Malaysian automakers. Proton was founded as a joint venture between the Malaysian state-owned firm Khazanah Nasional Berhad, and Mitsubishi.
Proton just posted a $72m profit for the fiscal year ending in March, after losing some $90m last year despite strong protectionist tariffs imposed by the Malaysian government. Or is that because of protectionist tariffs? Proton’s market share has been in decline for years now, thanks to government subsidies of its outdated designs. Perodua passed Proton in 2005 as the best-selling domestic Malaysian automaker, with over 40 percent of the market. Between 2002 and 2005, Proton’s Malaysian market share fell from 60 percent to barely 30 percent.
Speculation about a Proton-VW tie-up has been rampant in Malaysia for years (and the firm has also been tied to talks with PSA and GM), but now that it appears to be happening, the details are emerging slowly. Apparently an equity stake isn’t likely, meaning cooperation will probably focus on platform and engine sharing. It’s also possible that Proton’s excess capacity could be used to build Volkswagens, and Proton could replace its Perdana sedan with a rebadged Passat.
For now though, we’ll have to wait on details. According to Proton’s Chairman Mohamad Nadzmi Mohamad Salleh, a deal still won’t be announced for “one or two weeks.”