Malaysian Government Wants Volkswagen for Proton

By: Anthony Fontanelle

The Malaysian carmaker Proton is currently facing a bit of a crisis as its share in the Malaysian auto market is reduced as other car manufacturers expand their operations in the country. To make it a stronger force to reckon with in the Malaysian auto market, the Malaysian government is looking for a global car manufacturer to partner with Proton.

Recently, the Malaysian government expressed that it favors Europe's largest car manufacturer Volkswagen to become the partner of Proton. Although some analyst has said that there is a slim chance that such talks will push through, the Malaysian government is adamant that they have a good chance of having Volkswagen as a partner of Proton.

"The fact that we had the first round, the second round and a possible third round means that things are progressing," said Second Finance Minister Nor Mohamed Yakop. "The probability of working something out is reasonably good," the government official added.

In the past, Proton has the biggest share in the Malaysian market. The past years though saw the car company face strong competition from Asian rivals such as Toyota. With a partner as popular and as financially stable as Volkswagen, the Proton brand can be revived just like what the Alliance between Renault and Nissan did for the latter.

Advantages for the partner include the backing of the Malaysian government. Malaysia is the largest car market in Southeast Asia and can be a good market for car companies looking to expand their global coverage. The Malaysian auto market is also expected to grow after years of slow market demand.

Although the Malaysian government is looking in the direction of Europe, a suitor from the United States is calling. General Motors is reportedly interested in the Proton. Although the Malaysian government is aware of this fact and knows how large General Motors is, they are still adamant that they would prefer Volkswagen as the partner of Proton.

Although the Malaysian government does not directly confirm that they are biased towards Volkswagen, the persistence on the part of the government to talk with Volkswagen shows who they favor. "Volkswagen and GM are still on the table," commented Nor. "All that I can confirm is that both are on the table."

Volkswagen, on the other hand, confirmed that they are involved in talks with Proton but declined to share further information. The European car manufacturer is the largest in the continent and is known for producing quality vehicles and reliable auto components such as the and the like. With a company like Volkswagen partnering with Proton, the inexpensive cars produced by the Malaysian firm may be marketed all over the world.

Proton's success in the Malaysian auto market is due to the fact that they produce vehicles which are priced about $1,000 more than their competitors. This is because the government has taken steps to ensure that Proton vehicles are priced lower than competitors, making them the obvious choice for car buyers. This is done by overtaxing the competition. While non-Proton vehicles are subjected to 150 percent duties, Proton vehicles are exempted.

Whether Volkswagen will go into a partnership with a struggling car company but with a lot of potential is still to be determined. General Motors, on the other hand, may just be waiting on the sides and if Volkswagen walks away from Proton, General Motors is expected to be there which gives an impression that General Motors already has plans for the Malaysian automaker.

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