KUALA LUMPUR: MBM Resources Bhd, which holds 86% of Federal Auto Holdings Bhd, a dealer of Volkswagen cars in Malaysia, will benefit from any expansion drive the latter decides to carry out in the country.

“We act as distributors for Volkswagen and we will sell whatever new cars they decide to sell in Malaysia,” MBM’s finance manager Darren Kong told The Edge Financial Daily in a telephone interview yesterday.

DRB-Hicom Bhd last Friday announced it would collaborate with Volkswagen AG to assemble and manufacture Volkswagen vehicles in Malaysia at the former’s plant in Pekan, Pahang.

The joint venture will also see three new Volkswagen models being produced by the DRB-Hicom plant in Pekan by the end of the first quarter of 2011.

Federal Auto currently has two dealer showrooms in Malaysia, located in Jalan 222, Petaling Jaya, and another in Johor Baru. Another showroom in Glenmarie is slated to open by year-end, said Kong.

MBM Resources is currently the only listed company in Malaysia distributing Volkswagen cars in the country.

The distribution revenue of Federal Auto currently makes up 10% of MBM Resources’ topline, said Kong.

Other than Volkswagen, MBM also distributes other marques such as Daihatsu, Hino, Perodua, Mitsubishi and Volvo, its annual report said.

MBM reported revenue of RM363 million and net profit of RM39.99 million for the first quarter of its financial year ending Dec 31, 2010. For the quarter, its net assets per share stood at RM3.83, with basic earnings per share of 16.5 sen.

In FY2009, MBM reported revenue and net profits of RM1.18 billion and RM66.5 million, respectively.

MBM closed five sen higher to RM3.21 yesterday, its seventh consecutive day of gains.

Meanwhile, analysts say that Volkswagen’s increased commitment to Malaysia will see its market share increase.

Volkswagen currently ranks 16th among other carmakers in terms of volume sales in the passenger segment, according to the Malaysian Automotive Association’s statistics for the first half of 2010.

Analysts say that Volkswagen’s rising profile in Malaysia will also eventually increase competition in the automotive industry.

“In the longer term, we will see some substantial impact on the automotive industry,” Frost & Sullivan’s auto industry analyst Kavan Mukhtyar told The Edge Financial Daily yesterday.

Kavan said in the medium term, the impact would immediately be felt by car manufacturers targeting the middle-upper income market, like Toyota and Honda.

OSK Research said in a report yesterday that the decision for Volkswagen to assemble its cars locally will not bring down prices substantially.

“We think it would be quite a while before Volkswagen (cars) become more affordable as initial production roll-outs will have minimal localisation of content,” OSK’s analyst Ahmad Maghful Usman said in the report.

This article appeared in The Edge Financial Daily, August 17, 2010.