(Photo: Great Wall Motors)

KUALA LUMPUR, Malaysia — Malaysia on Wednesday awarded a manufacturing license to a $618 million venture that will assemble fuel-efficient SUVs for Chinas Great Wall Motor Co.

The license was the first issued under the countrys new auto policy unveiled in January, aimed at making Malaysia a regional centre for energy efficient vehicles.

Trade Minister Mustapa Mohamad said privately owned Go Automobile Manufacturing will invest 2 billion ringgit ($618 million) over the next four years to expand its manufacturing plant in northern Kedah state. It will have a production capacity of 100,000 vehicles by 2018, with 60 per cent of the output to be exported to Southeast Asian countries, he said. about 4,000 jobs will be created.

This is a very important milestone for Malaysias auto industry, he said.

Mustapa said more manufacturing licenses are expected to be issued this year to bolster the auto industry.

The new auto policy is the latest step in a gradual liberalization of Malaysias protected car market. The government previously only issued new manufacturing licenses for vehicles with engine size of 1.8 litres and above to protect national car makers Proton and Perodua.

But intense competition from neighbours Thailand and Indonesia is forcing Malaysia to loosen up its policy to woo investors.

Go Automobiles plant will assemble the Haval M4 and the H6 sports utility vehicles, with gasoline and diesel engines at 1.5 and 2.0 litres, said Gos chief executive, Ahmad Azam Sulaiman. He expects the first vehicle to roll off the assembly line in September.

Ahmad Azam said the vehicles will have local content of up to 85 per cent by 2018 and will be initially exported to Thailand and Cambodia. Go is owned by Ahmad Azam and two other Malaysian partners.

Great Wall Motors, the 8th largest auto company in China and its biggest sport utility vehicle maker, may take a stake in the Malaysian plant in the future, Ahmad Azam said.

Roger Wang, a senior executive with Great Wall Motors, said the companys sales reached 760,000 cars last year and is targeted to rise to 890,000 this year. The company is listed on the Hong Kong and Shanghai stock markets.

Wang said Southeast Asia, with more than 500 million people, is a significant region for Great Wall Motors, which last year exported 70,000 cars.

Great Wall currently sells two models in Malaysia through a local distributor. The company is likely to make Malaysia its Southeast Asian production base, executives said.

The government hopes its new auto policy will boost total industry production to 1.25 million vehicles and exports to 250,000 vehicles by 2020.

Last year, Malaysias vehicle production was around 570,000 vehicles and exports were 20,000 vehicles. That was dwarfed by Thailand which makes more than 2 million vehicles a year and by Indonesia with annual production exceeding 1 million.

Ahmad Azam said his companys 2 billion ringgit investment will be funded by loans from banks in Malaysia and China.