By on August 14, 2010

Malaysia is a country of close to 30m people and Volkswagen wants a slice of the pie. They already tried, but found out that getting a slice is not a piece of cake. Playing footise with Malysia’s Proton was a perennial on again, off again affair that led to nothing. Last time, it looked like VW would set up a CKD operation in Malaysia by themselves, but now it seems that they have found a partner. Not Proton. Not again.

It is reported that DRB-HICOM Bhd and Volkswagen AG  signed a memorandum of understanding to collaborate on the assembly and manufacturing of Volkswagen vehicles in Malaysia. The goal is to produce CKD (completely knocked down) Volkswagen in Malaysia.

CKD is basically a kit car. You get all the parts in a big box, and then assemble it locally, usually by hand. It’s one of the most nonsensical ways of building a car. The only sense it typically makes is to circumvent customs duty or other import restrictions. If those wouldn’t be there, importing the whole car would make more sense.

CKD assembly is the core business of DRB-HICOM. They have experience in assembling foreign cars for Honda, Suzuki and Mercedes-Benz in Malaysia.

The Volkswagen CKD models will be assembled in Pekan, one of DRB-HICOM’s plants in Malaysia.

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4 Comments on “This Time It’s Serious: Volkswagen Tries Again In Malaysia...”

  • avatar

    sounds like they have a UAW in Malaysia… considering the custom rules to “protect” national labor. An the outcome is the same quality car (Proton)

  • avatar

    No they don’t have unions however imported vehicles are very heavily taxed. I was in a car showroom in Kuala Lumpur back in 2004 and the starting price for a Benz was around US $120K .

    That said there was a whole lot of money there as people were buying Brabus versions of the Benz.

    Visited a Kampong out in the countryside, guy had a Plasma TV, a BMW 7 series + an outside toilet.

  • avatar

    I wouldn’t take the CKD to that extreme. Does the Malaysian request some local content percentage? or VW can go with 100% foreign parts?

    Here CKD is chosen because it has a WAY lower tariff over CBU, IIRC it’s 3% vs 40% and the government required that cars have 35% local content.

    Then, to promote the industry, new ventures are allowed to have SKD plants for limited time.

    Don’t be so hard on this, there’s a lot of people that eats from CKD sites.

  • avatar

    You need to do CKD in order to sell imported cars in Malaysia. Just like you have to do CKD if you want to sell imported light trucks in the US.

    Protectionism hasn’t been eradicated yet, not even from Western countries.

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