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Volkswagen eyes assembly plant

Volkswagen Philippines Inc. is pursuing its plan to assemble cars in the country, an industry source said Thursday.

The company held preliminary talks with the Board of Investments about its intension to create an assembly facility and eventually go into manufacturing, with an initial investment of $200 million, the source said.

The source, who was aware of the discussions, said Volkswagen Philippines was ready to invest under the existing Motors Vehicle Development Program, and not under the Comprehensive Automotive Resurgence program.

Volkswagen would deliver the $200-million investment if the government would allow them to come in via the MVDP as a new entrant, without the capability to comply with the 200,000-unit required volume under the six-year Cars program, the source said.

The Ayala Group, the exclusive distributor of the German vehicles via Volkswagen Philippines, would also invest in an automotive park.

“Ayala committed $200 million because they have to develop an automotive park. This is on top of Volkswagen’s investments,” the source said.

The source said once the plan was finalized, a corporate vehicle would be created by both partners.

Volkswagen will also bring in German parts suppliers, the source said.

The source said Volkswagen was looking at enrolling its assembly project before MVDP was phased out and replaced by the Cars program.

It would take Volkswagen Philippines one and a half years to complete an assembly plant or at least two and half years before production could start.

The Cars program grants $600 million worth tax subsidies to three models that can produce 200,000 units each over a six-year period while MVDP only grants preferential import tariff for completely knocked down auto parts of as much as 10 percent and one percent if imported from Asean.

Volkswagen is paying a 30-percent import duty as it imports CKD vehicles outside Asean.

Combined with VAT and excise taxes, total taxes already account for 50 percent of the price of a Volkswagen car.

Volkswagen plans plans to build a major production hub in Asean to expand its presence in the region.

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