FRANKFURT -- Volkswagen AG and Proton Holdings Bhd have agreed on a partnership deal to assemble the German carmaker's vehicles in Malaysia for sale in southeast Asia, Volkswagen said on Tuesday.
Europe's largest carmaker said it would not take an equity stake in Proton as part of the deal, which envisions launching the first locally assembled VW models in Malaysia by the end of 2005 and generating sales of over 15,000 units in 2006.
"Volkswagen wants to achieve a notable market share in the countries of ASEAN in the coming years," Chief Executive Bernd Pischetsrieder said on Tuesday in a statement, referring to the 10-member Association of South East Asian Nations.
Citing independent estimates, Volkswagen said the auto market in the ASEAN trade region -- where the company is scarcely present -- should grow by 67 percent, or 1 million units, to 2.4 million vehicles sold annually by 2015.
Volkswagen said last week it was in talks with Proton about a partnership that could give it a foothold in southeast Asia's fast-growing auto market.
Proton controls nearly half of the Malaysian market. A tie-up also gives Volkswagen access to Proton's extensive production capacity and dealer network.
Proton, one of Malaysia's two carmakers, said last week it would tie up with a foreign firm by the end of the year as it prepared to compete in a market that was opening up under regional trade rules.
After protecting its domestic car industry for nearly two decades by slapping duties of over 300 percent on imports, Malaysia has committed to reducing auto tariffs to between zero and 5 percent by 2008 under the ASEAN Free Trade Agreement.
Volkswagen said officials had signed a memorandum of understanding on Tuesday on what it called a "long-term strategic partnership".
"The collaboration will enable Volkswagen to establish a base for servicing the markets of the ASEAN region, without having to make extensive capital investments in the region," it said. "Opportunities for joint vehicle development will also be closely examined."
As a first step, Volkswagen and Proton have agreed to begin preparations for assembling kits of two VW models, it said.