Newspaper sources have confirmed that VW is about to embark on a due diligence audit of Proton before acquiring a 51% stake in the troubled Malaysian car maker. The PSA group comprising Peugeot and Citroen were also interested in Proton, but their focus was finding a development partner, not a company to take over. VW is expected to pay upwards of US$500m for its stake.

This deal is interesting for two reasons. Firstly, VW is planning on building the Passat in Malaysia and export them to Japan, taking advantage of the free trade deal that exists between the two countries. That could allow VW to significantly increase it share of the mid-size luxury market in Japan. Malaysia is also working on free trade agreements with Australia and the US, and the approval of these would allow VW to significantly increase manufacturing capacity in the country. The second interesting note is that the majority stake in Proton would also give VW some sort of stake in Lotus.