Published on 03/04/2014
Volkswagen seeks to set up first plant in Thailand
Volkswagen AG, Europe's largest car maker, has applied to set up its first plant in Thailand to help narrow the gap with Toyota Motor Corp in Southeast Asia, people familiar with the matter said. The company, based in Wolfsburg, Germany, is seeking to participate in a government scheme offering tax exemptions for car makers investing at least 6.5 billion baht in local manufacturing, said the people, who asked not to be identified because a final decision has not been made. Annual production must reach at least 100,000 cars in the fourth year after starting operations, and manufacturing must begin by 2019, in order to receive the incentives. The Ministry of Industry scheme includes vehicle assembly, components and engine production. Car makers had until March 31 to apply, according to a ministry statement from October. ''VW has always been one of the manufacturers trying to position itself globally,'' Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler, said by phone. ''Current sales volume in Southeast Asia is much smaller than in China or the US, but it's one of the regions where Japanese car makers are significantly ahead of VW, so there's room for growth.'' The car maker anticipates industry-wide sales in the region will increase on average 4.5% annually through 2018. VW started assembling Passat sedans in Malaysia with local car maker DRB-Hicom Bhd in 2012. VW sees ''a strong market opportunity'' in Southeast Asia, chief financial officer Hans Dieter Poetsch said in a presentation published on the company's website last week. Volkswagen has yet to make a final decision on producing vehicles in Thailand as the exact terms and conditions may still change. VW declined to comment on any plans it has for the country. ''If true, it's a good strategy by Volkswagen to build production facilities in Southeast Asia as they're trying to increase their sales in emerging markets,'' said Jessada Thongpak, an analyst with IHS...
Thanayut Tejasen, managing director of Thai Yarnyon, the authorised importer and distributor of Volkswagen, said having a car plant here will make Volkswagen's retail prices more competitive. At present, Thai Yarnyon imports Volkswagens from Germany subject to customs duty of up to 300%. Sales of Volkswagens in the Thai market stood at 1,000 units in 2013 and 812 units in 2012. Japanese firms controlled 88% of the nation's market in 2013, according to LMC Automotive. Toyota led the market with a 30% share of the 725,135 passenger vehicles sold in Thailand last year, followed by Honda at 29%. Thailand has been encouraging car makers to make and sell vehicles with higher fuel efficiency. In 2007, when it first unveiled the eco-car policy that exempts manufacturers from paying corporate tax for eight years and includes no levies of import duty on machinery and equipment, five companies applied to set up factories.