Volkswagen to Manufacture in Thailand

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Auto industry specific tax incentives apply until 2019

Volkswagen look set to establish their first manufacturing plant in Thailand, having made applications to the country’s Ministry of Industry. The news is welcome for the country, which has seen foreign investment plummet in recent months due to political instability.

The Thai government has been incentivising auto manufacturers to invest in the country by offering tax exemptions for manufacturers investing at least 6.5 million Baht (US$0.2 million) and have an annual production of at least 100,000 units by their fourth year of operations. The scheme is in place until 2019 and also includes vehicle assembly, component parts and engine production enterprises.

Volkswagen have yet to confirm the deal, saying that negotiations are still on-going with the Thai government, but say they expect domestic sales in Thailand to increase by an average of 4.5 percent per annum over the next five years.

RELATED: Thailand Auto Market Accelerates Into Overdrive

Without a local production base in the country, Volkswagen must import their cars to Thailand through their local dealer Yarnyon and are subject to duties from Germany at 300 percent.

Chris Devonshire-Ellis, Managing Partner for Asia for Dezan Shira & Associates comments, “The anticipated move by Volkswagen to invest in Thailand reminds us once again that despite political problems, the underlying trends in Thailand remain very strong. While corporates may have some short term reservations about stability, the medium-long term outlook remains positive and Volkswagen’s decision reflects this sentiment.”

Currently, the Thai market absorbs over 725,000 new autos per annum and is dominated by Japanese manufacturers, which held an 88 percent market share in 2013, led by Toyota.

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