German automaker Volkswagen AG is still weighing plans to build a factory in Taiwan, or to outsource production to local carmakers, government officials and Volkswagen’s distributor said yesterday.
The statements came after local media reports that Volkswagen had scrapped its plans in favor of investing elsewhere because of tax and other concerns.
“The investment plans remain under evaluation,” Lien Ching-chang (連錦漳), a deputy director-general at the Industrial Development Bureau, told a news conference.
Lien said Volkswagen, which aims to be the world’s No. 1 automaker by 2015, intends to build a manufacturing facility in Southeast Asia or India.
Beldare Motors Ltd (標達汽車), a subsidiary of Taikoo Motors Ltd (太古汽車) and the exclusive distributor of Volkswagen passenger vehicles, suggested Volkswagen build a factory here to boost its market share in Taiwan and Greater China, Lien said.
China-bound car exports may be exempted from tariffs in the future under the Economic Cooperation Framework Agreement (ECFA), Lien said, adding that Taiwan is working to include the issue in the next round of cross-strait trade talks.
Premier Wu Den-yih (吳敦義), who met a top Volkswagen executive last year, welcomed the investment plan and instructed the bureau to provide assistance.
Wu said that Volkswagen was still very interested in building a plant in Taiwan, but the tax breaks offered by the government were lower than the company expected.
To enjoy preferential tax treatment, at least half of the car assembly must be done in Taiwan before the vehicle is exported to other manufacturing sites, he said.
However, that would increase labor costs — which is a concern for Volkswagen, Wu said.
Volkswagen has praised the quality of auto parts and car manufacturing technology here, said Chiou Chyou-huey (邱求慧), a bureau division chief.
“It is in talks with 14 auto parts makers for potential cooperation,” Chiou said.
Volkswagen has also pressed for looser foreign labor rules among other investment incentives, but the bureau did not promise any additional terms other than existing benefits, Chiou said.
Volkswagen may apply for preferential interest rates when leasing or acquiring land for the planned factory. Taiwan just lowered the corporate income tax rate from 20 percent to 17 percent last year.
“The German automaker is cautious about its investment plan but has not set a timetable for a decision,” Chiou said.
Beldare Motor also issued a statement denying Volkswagen had dropped its investment plan.
“It is not true that the investment plan has failed,” the distributor said. “The government has made all goodwill gestures possible for which we and Volkswagen are grateful.”
Local media cited the distributor as saying the government was not supportive enough.