Volkswagen (VW) is planning to set up its first production plant in Thailand, as part of its efforts to join the second phase of the government-supported "eco-car" project, reports the Bangkok Post. Citing Hans Dieter Pötsch, the company's chief financial officer, the report suggests that VW sees a "strong market opportunity" in Southeast Asia. However, VW declined to comment further on the report. Jessada Thongpak, an analyst with IHS Automotive in Bangkok, commented, "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...What we will have to see is what will be their strategy, given that ASEAN [Association of Southeast Asian Nations] is dominated by Japanese brands."
Significance: VW, along with other automakers such as Toyota, Nissan, and Mitsubishi, has expressed its willingness to join the next phase of the eco-car scheme, which has proved instrumental in the development of Thailand as a major vehicle manufacturing and export base in South Asia. Five Japanese automakers – Mitsubishi, Honda, Toyota, Nissan, and Suzuki – joined the first phase of the scheme launched in 2007. The criteria for the second phase of the project specify that participants from the first phase must expand production or reinvest in the second phase with minimum capital of THB5 billion (USD154.2 million), while new manufacturers must invest at least THB6.5 billion. According to IHS Automotive data, VW's vehicle production is mainly concentrated in Europe and Greater China, whereas South Asia accounts for around just 1% of its total global output. This is expected to improve in the ensuing years and the region is forecast to contribute around 4% by 2020. The automaker's Indian facility is a key production plant in the region, while production in Indonesia, which started in 2011, remains at low levels. More details about the list of automakers that will be participating in the project will be made available in the coming week after the deadline to submit applications expired on 31 March. Although this report about VW is unconfirmed, such a move would send a strong signal that the current political turmoil in Thailand is not affecting long-term investment in the country.
