Volkswagen picks Turkey for new $1.5 billion factory

German car manufacturer Volkswagen has made the long-awaited decision to open a new factory in Turkey’s western province of Manisa, business news site bne Intellinews reported on Monday.

Turkey beat out the other lead contender, Hungary, despite higher labour costs, because Volkswagen wished to tap Turkey’s large domestic market for cars, the news site said.

The car manufacturer believes it can sell up to 40,000 of its Passat model in Turkey annually, and could also get lucrative orders from government organisations for its Passat-model limousines, it said.

The plant will reportedly also produce vehicles for Volkswagen subsidiaries Skoda and Seat.

The deal will be inked in September of October this year, bne Intelligence reported, quoting German state media outlet ARD.

In June, German newspaper Frankfurter Allgemeine Zeitung reported that the automotive company was in talks with Turkey to spend as much as $2.3 million on a factory in the country.

Investment costs are estimated at between 1.3 billion euros ($1.5 billion) and 2 billion euros, FAZ said. The Turkish government has offered support totalling 100 million euros, it said.