Volkswagen may build factory in Thailand

Jan 4, 2008, 12:13 GMT

Wolfsburg, Germany - Automaker Volkswagen confirmed Friday it might build a factory in Thailand after the collapse of its efforts to enter the South-East Asian car market in tandem with Malaysian manufacturer Proton.

Two days after Bangkok news reports that Volkswagen had filed a detailed application in November for an 'eco-car' tax break, a company spokesman told Deutsche Presse-Agentur dpa that Volkswagen was waiting for a decision.

'We want to strengthen in South-East Asia,' he said at VW's Wolfsburg head office in Germany,

The Bangkok reports said Volkswagen had told the country's Board of Investment it would invest 27 billion baht (912 million dollars) in an assembly and parts plant at Samut Prakan, on the outskirts of Bangkok.

The reports did not say where the components would be imported from.

About 65 per cent of the small cars assembled at the plant would be exported from Thailand. Volkwagens are currently a rarity on South-East Asian roads, though the brand is a top manufacturer in China.

The German magazine Auto Motor Sport said Friday Volkswagen would itself decide in the first half of this year whether to go ahead.

Tata of India and Japanese makers Toyota and Mitsubishi are also applying for the Thai government's eco-car incentive, and Honda, Suzuki and Nissan have already won approval for assembly projects from the Board of Investment in Bangkok.

To qualify for the tax benefit, a maker must intend to raise output to at least 100,000 vehicles annually at its Thai plant and the fuel economy of the cars must not exceed 5 litres of petrol per 100 kilometres.

The Thai news reports quoted an anonymous board official saying that once the seven assemblers had received approval, 60.17 billion baht in capital investments would flow into the sector 2008-10.

Talks between Malaysia's Proton and Volkswagen collapsed in November when Kuala Lumpur decided the state-controlled carmaker had prospects of returning to profit alone. Volkswagen said it would seek other opportunities in the region.

Volkswagen, which also owns the Audi, Seat and Skoda brands, has ambitious plans to almost double world output of VW-brand cars from 3.4 million vehicles last year to at least 6.5 million by 2018.

Currently, 6.3 per cent of cars sold worldwide are Volkswagens, according to January-November 2007 figures.

The maker, which is controlled by Porsche of Germany, seeks to boost that share to 9 per cent, and can hardly ignore the fast- growing South-East Asian economies if it is to achieve that target.

It still believes that group shipments, including the subsidiary brands, could exceed 10 million vehicles by 2018, overtaking the world's current top manufacturer, Toyota. Current Volkswagen Group world sales are just above 6 million units.

The company has already opened a plant in Russia and is planning a factory in India. A decision is set in the next few months on whether to manufacture cars in the United States to beat the weakness of the dollar.