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Two Volkswagen Keys

Volkswagen Closing in on Proton Deal

Malaysia’s national carmaker may soon be in the hands of Europe’s largest automaker, Volkswagen AG. Proton, established in 1983 has been dominating the Malaysian auto market until recently. The competition in the said market has led to the declining market share for the Malaysian automaker. Faced with this problem, the Malaysian government has been looking for an international automaker which is interested in buying 43 percent share in Proton which the government currently owns.

Although General Motors and Volkswagen are both having talks with the Malaysian government, it appears that the state is more interested on what Volkswagen has to offer. Three talks have already transpired between the Malaysian government and Volkswagen regarding the sale of the 43 percent share in Proton.

According to a Malaysian financial weekly publication The Edge, Volkswagen is now closing in on the deal that will give the European automaker 43 percent of Proton. Currently, the 43 percent share of the Malaysian government is in the hands of Khazanah Nasional Bhd - the investment arm of the Malaysian government.

“It is also understood that VW may have agreed to pay some cash for its 51 percent equity in the new company that will own key assets of Proton,” reported The Edge. Volkswagen is expected to pour money into the Malaysian automaker. With the competition getting fiercer in the Malaysian auto market, it can be expected that Volkswagen will be leading Proton into a new era. That is if the Volkswagen and the Malaysian government agree.

The possible acquisition of Proton by Volkswagen will give the European auto maker better diversity in their offering. It is expected that Proton vehicles will be marketed by Volkswagen outside Malaysia. With the addition of Proton cars to their offering, Volkswagen will be expanding their presence in the global auto market.

In the past, Proton has enjoyed success in Malaysia due to its advantage in taxes. Non-Proton vehicles are sold in Malaysia with high taxes which mean that Proton cars are much cheaper than the cheapest competition. But with better foreign cars making an appearance in the Malaysian auto market, auto buyers slowly shifted away from Proton.

The prestige that Volkswagen will give Proton though will give the latter a boost in popularity. Aside from that, the two automakers will surely be sharing components and vehicle platforms. Auto parts such as the Volkswagen windshield wiper motor may soon be used on Proton cars. Technologies used by Volkswagen on their current auto models can also be used on Proton cars.

The Malaysian government though is not rushing. According to Malaysia’s trade minister, Rafidah Aziz said that they are looking to sell the 43 percent share they have in Proton but they are not in a hurry. The government set a goal to reach a decision by the end of this year. Since Proton is an important part of Malaysia’s economy, the Malaysian government is studying the deal very carefully.

“What we are looking for now is for somebody to buy the government-owned shares and that somebody should be able to provide the right kind of technology,” said the trade minister as reported by Reuters.

Meanwhile, shares for Proton jumped as reports surfaced of its possible tie-up with Volkswagen AG. According to experts, the positive news is the reason for the increased share value for Proton.

About the Author

Anthony Fontanelle is a 35-year-old automotive buff who grew up in the Windy City. He does freelance work for an automotive magazine when he is not busy customizing cars in his shop.

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