German automotive giant Volkswagen (VW) has decided to build a new plant in Turkey's Aegean province of Manisa and will sign an agreement in late September or early October, German broadcaster ARD has reported, citing government sources in Berlin.
The German state Lower Saxony (Niedersachsen), one of the stakeholders of VW, is also reportedly backing the decision.
ARD, the public service broadcaster in Germany, says that the German automaker has chosen Turkey despite lower labor costs in Bulgaria, while the Saudi Arabia alternative has been off the table.
According to the news, the German company has raised the issue of high taxes on new cars in Turkey and is waiting to see whether any steps will be taken regarding the issue.
ARD stated that VW seeks to produce the Passat model in Turkey and to sell 40,000 cars of this model in the country a year, as well as planning to produce the Skoda and Seat models at the new factory.
An investment of 1.3 billion euros ($1.46 billion) to 2 billion euros is projected for the new plant, which is said to provide employment for approximately 5,000 people. The factory is expected to begin production in 2022 and serve as one of the most important production facilities in the region.
The giant automaker has preferred Turkey to Bulgaria despite lower labor costs in the latter due to the volume and potential of the Turkish market. Earlier reports also stated that the factory planned to be established in Turkey would have the capacity to produce 300,000 vehicles per year and would produce the Passat and Skoda Superb models, while some other news reports also suggested that it would manufacture Seat Ateca and Skoda Karoq models int Turkey. Two weeks ago a German trade magazine, Automobilwoche, which did not cite its sources, said Qatar, owning a 17 percent stake in Volkswagen, was urging the supervisory board to pick Turkey for the plant.
VW CEO Herber Diess paid a visit to Turkey last month and met President Recep Tayyip Erdoğan. The meeting was reported as having an effect on the company's final decision. This visit by Diess was not his first in in recent years, as he had come to Turkey and established contacts here a number of times before.
Moreover, Presidential Investment Office head Arda Ermut also conducted negotiations with Volkswagen and conveyed important messages to the brand. Ermut pointed out the advantages and incentives offered by Turkey, highlighting the importance of the factory not only as an investment but also in the symbolic sense.
ARD previously reported that the Saudi Arabian administration had also placed an offer
to VW for the new production facility, which Volkswagen planned to establish particularly to create extra capacity due to increased demand for the Seat and Skoda models.
Saudi Arabia, which seeks production alternatives to diversify away from its reliance on oil and wants an automotive investment in its territory according to ARD, intensified its initiatives in accordance with VW's plans.
Saudi Arabia has offered VW up to $ 1,000 in support for each vehicle to be produced in the country for at least 10 years. In addition, Riyadh proposed a guarantee of vehicle purchases in five-digit numbers for the government every year, pledging to provide support on issues such as building, land, infrastructure and education. However, it has been suggested that this proposal was not accepted by VW.