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Volkswagen to invest USD30mn in Sri Lanka for vehicle assembly plant

Volkswagen

Aug 04, 2015 (LBO) – German based automobile manufacturer Volkswagen has agreed to invest 30 million US dollars to set up a vehicle assembly plant in Sri Lanka, BOI Chairman Upul Jayasuriya said.
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“It’s not huge but it’s just the footprint.
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We have asked them to set it up and given a time period for them to export,” “Idea is that now we have a huge brand like Volkswagen and other large companies like Toyota and Nissan can follow this.” Jayasuriya said. Jayasuriya said the BOI has so far received over 3,500 million US dollars worth foreign direct investment proposals for this year in relation to four major projects.
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“Last year it was only 1,650 million US dollars of FDI for the whole year.” he said.
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Nish
Nish
9 years ago

The question is will vokswagen get tax holidays to sell vehicles in Sri Lanka? They should at-least add 30% local value addition or we should not grant them tax reductions to sell in Sri Lanka. otherwise it’s just a sham operation to get around taxes.

BKVWHK
BKVWHK
9 years ago

It would be interesting to find out, who the local partner is for the project, and how many jobs will be generated on a 20 acre property in Kurunegala. Why Kurunegala ? There must be a story behind it.

Ranji
Ranji
9 years ago
Reply to  BKVWHK

Jobs will be very minimum because I suspect this is just a knock down then assemble plant without any local value addition. Kurenegala already has a free economic zone so it could be the reason.

Totalwealth Plan
9 years ago
Reply to  Ranji

Indeed. VW is heavily reliant on robotics.

Pranavan Maru
Pranavan Maru
9 years ago
Reply to  BKVWHK

story is, they are using a volkswagen deal to give the incumbent president a hard time campaigning there !

Totalwealth Plan
9 years ago
Reply to  Pranavan Maru

Yes, this seems to be a political stunt. If they plan to export why Kurunegala?

Totalwealth Plan
9 years ago

If they planning to export it would be better to locate the plant closer to a port. VW is heavily reliant on robotics and hence employment generation will not be a major contributor to the local economy. In any event this is no more a labour-intensive sector.

Giabao
Giabao
9 years ago

i think is a big faux and very suspicious. A company like VW will never make a tiny investment like 30 Mn.

Vimal Carlos
Vimal Carlos
9 years ago
Reply to  Giabao

30 mn u can make a garrage.

S
S
9 years ago

My two cents – Given the size of the investment (If it’s
actually signed and verified – someone should ping VW investor relations and
ask) this should like a SKD/CKD plant which would

1. Exploit a tax loophole to create more value for VW(likely).
i.e. imported cars will have much higher taxes than the components. Hence by bringing
it down as components and assembling it here will allow the VW to realize >>
profit and possibly provide the car at a lower price to consumers (some benefit
to the end consumer if tax saving is eventually passed on) I doubt any cars
will be re-exported from Lanka (even though our BOI chairman claims so… why not
then put the plan near a port ??) given India and most other SA countries have
high import duties for fully assembled vehicles unless the SAFTA provides any
concessions (I have not looked into it)

So what is the net benefit to the country? – -Less taxes to
gov (import and BOI tax exemption on profits possibly- TBV), +wages for employees
(not enough we need to have local value addition e.g. that’s what India has been doing), +hopefully
lower price for anyone who would be able to afford VW/Audi etc, ??Benefit to ecosystem ??

2. The number of employment opportunities created by these
kind of plants tend to be ~50 at best (I don’t have the actual numbers in this
case but this is what I have seen for a small plant, correct me if I am wrong).
Generally low skilled fitters.

3. I doubt there will be any sourcing of local parts. Hence
the auto eco system would not develop, but hope companies like Micro would be
able to supply some parts in the future. (on second thought isn’t Micro doing a far
better job (assembling cars, developing and building then locally, building
busses etc) with likely to create far more value addition and skill development
opportunities?? too bad he’s not German nor has a brand like “VW”)

To develop a meaningful auto hub this investment is not sufficient.
One needs to attract couple of auto plants into strategic place like in
Hambantota port free trade zone and provide support to develop and ecosystem. –
This is what Hyundai and Chennai did/achieved

It’s a good thing, but I think some politicians are making a
mountain out of ant hill J. I didn’t see this much noise
when Accenture, Aviva, HSBC and many other multinationals set up shop here to
provide employment for 100’s if not 1000’s. (Don’t get me wrong, we need to
find opportunities for every strata in this country, let do meaningful work
than spending way too much time on blowing the trumpet, to make SL a better
place)

Shane Ata
Shane Ata
9 years ago

This is all craps don’t believe what politicians say can you guy’s remember one told that they made vesak holidays worldwide big companies won’t invest in a country that has more holidays than working days in a one-year if it happens it’s good only my two cents

Mahesh Amarasinghe
Mahesh Amarasinghe
9 years ago

This is the begin of new era..so y u all not think about positive side…..still where we are…Germeny was the one of the most powefull country in world war 1 and 2…at that time we were colony I am not going to explain world wars and industrial revolution and etc….still our main incomes are tea.coconut and rubber…still our economy depend on them…so who interoduce those ….it came frome British.dutch and potouges …so who introduce railway…so think… these are simple examples… any body can understand…..vw will be a revolution of machines and industriales in Sri Lanka……no body like to invest big money of the begin…. it is the art of investment …if I going to start a new business am not going to invest big money…not me others also same….so we must improve our business gradually….that is the development…. (goodwill and profit)…we must see the world.. we should go with them….specially world powers….

Sarath
Sarath
9 years ago

sadly you are mistaken son. Textile is the biggest export of Sri Lanka now. Software will pass tea in the coming decade.

And micro already assembles cars. It would be a tragedy if micro have to go to extinction because of tax benefits to Vokswagen because one fine day vokswagen is going to pull out of Sri Lanka. Yes foreign investment are welcome but they should not have an advantage over local companies. if vokswagen is going to export that is awesome. but if they are going to just put parts together and then sell locally that is not going to help our economy.

Lal
Lal
9 years ago

I don’t see any progress in this?????

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