Volkswagen AG has applied to set up its first assembly plant in Thailand, reports Bloomberg, citing people familiar with the matter.

The German carmaker is seeking to participate in a government programme that offers tax exemptions for carmakers investing at least 6.5 billion baht (RM656 million) in local manufacturing, said the sources, who did not want to be named because a final decision has yet to be made.

Also, annual production must reach at least 100,000 cars by the fourth year of operation, and manufacturing must start by 2019.

This is consistent with our northern neighbours’ Eco Car programme, which includes vehicle assembly, components and engine production. Carmakers had until March 31 to apply, the report states, citing a ministry statement from last October.

The Eco Car programme’s second-phase requirements include (for the vehicle) a fuel economy under 4.3 litres per 100 km, CO2 emissions under 100 grams per km, engines displacing 1.3 litres and under (petrol) or 1.5 litres and under (diesel), plus Euro 5, R94 and R95 compliance.

Throw in a minimum investment of 6.5 billion baht (RM656 million) and a minimum production of 100,000 units per year by the fourth year of operation, and the excise duty incentive given is 14% (normally 30%); dropping to 12% if the engine is E85-compatible.

First-phase Eco Cars include Hondas Brio and Brio Amaze, Mitsubishis Mirage and Attrage, Nissans Almera and March, the Toyota Yaris and the Suzuki Swift – all of which are powered by 1.2 litre petrol engines in Thailand.