Volkswagen and their plan to build a new manufacturing plant in Turkey will become official to capitalize on the untapped automobile market.

Motivations Behind Turkey

Before Volkswagen settled on Turkey as their expansion destination, another contender was vying for the manufacturing plant, which will undoubtedly bring tons of new jobs. Hungary could’ve been the next spot for Volkswagen’s expansion. The labor costs were cheaper in Hungary. Hungary is a hotspot for automakers as proven by BMW’s recent billion-dollar investment in the European nation just last year. Hungary also has the lowest corporate tax rate compared to other nations in the EU.

If Hungary is such a prime location for automakers, what motivated Volkswagen to make roots in Turkey? Volkswagen chose the location with the most potential. In Turkey, Volkswagen hopes to make connections and sales with government organizations. These sales would not only be lucrative because they would feature their Passat-model limos, but it’s also another way for them to establish their brand in the nation.

There were also talks that investors were making a push for Turkey versus Hungary. Qatar owns a near 20 percent stake in Volkswagen and was suggesting that Turkey become the new plant’s location. Whether or not Volkswagen took their investors’ suggestions to heart, it’s important to not forget about investor influence.

Will Their New Investment Pay Off?

Volkswagen has factory roots in many European nations, so Turkey will fit right in with the rest of the factory families. It may be a while before ROI can be calculated for Volkswagen’s move into Turkey, but it will be interesting to see if they chose the right nation or if there will be regrets for not going with Hungary.