Malaysian conglomerate Sime Darby Motors and BMW Group Malaysia open a 132 million ringgit ($33.5 million) engine plant for locally assembled vehicles and to support exports to regional markets including Vietnam and the Philippines.

Sime Darby Managing Director Dennis Ho tells reporters the plant will produce 10,000 units a year in a single shift.

The 91,493-sq.-ft. (8,500-sq.-m) engine plant is the first of its kind for contract manufacturer Sime Darby. Until now, locally assembled BMW and Mini models have used engines imported from Germany or Austria.

The new facility will assemble 3- and 4-cyl. gasoline engines, 4-cyl. diesel engines and 3- and 4-cyl. gasoline engines for plug-in hybrid vehicles. It is the second BMW engine plant in the region after Rayong, Thailand.

The new engine operation is alongside the assembly plant and regional parts-distribution center.

Ho says there is no compromise in the quality of engines being built at the plant in Padang Meha 233 miles (375 km) north of Kuala Lumpur. “The standards of the quality checks are similar to those used in Germany,” he says. “The parts and components are imported from Germany.”

BMW Group Malaysia CEO Harald Hoelzl says Malaysia plays a major role in BMW’s plans for Southeast Asia.

“In Malaysia, BMW has already successfully achieved a 15% increase in the deliveries of BMW, Mini and BMW Motorrad vehicles, with 3,000 vehicles in the first quarter,” he says.

Malaysian motoring analyst Paul Tan says the inclusion of diesel engines is interesting because BMW Malaysia no longer has diesel models in its lineup. “This means that the company is likely looking to introduce new oil-burning models soon,” Tan says on his website.

Sime Darby Chairman Abdul Aziz Wan Abdullah says the company aims to be the preferred contract-assembly partner for the most dynamic automakers in the region.

“We aim to produce more than 50,000 vehicles (including Mazda and Hyundai vehicles produced at the company’s Inokom plant), as well as the engine parts and components for the vehicles by the year 2020,” he says in a statement.