FRANKFURT -- Volkswagen Group has postponed the final decision whether to build a car plant in Turkey, a company spokesman said, amid international criticism of the country's military operation in Syria and concerns about potential reputational fallout.
"We are carefully monitoring the current situation and look with concern at current developments," VW said on Tuesday.
Earlier this month, VW established a subsidiary in Turkey's western Manisa province when the automaker said that it was still in the final stages of negotiation and that it had not made a final decision on the factory.
The Turkish plant is scheduled to build the next-generation VW Passat and Skoda Superb midsize model lines with a maximum annual production capacity of 300,000 vehicles, according to an internal document seen by Automotive News Europe.
Its production start was scheduled for 2022.
VW picked Turkey for the factory because of "positive macroeconomic conditions" including an 80 million-strong population that rivals Germany's in size and its location amid growth markets, the document said.
VW also considered sites in Bulgaria, Serbia, Romania and northern Africa as the plant's location.
Volkswagen supervisory board member Stephan Weil, prime minister in Lower Saxony where the carmaker is based, said that he could not imagine that Volkswagen will make an investment given the current circumstances.
"I have the impression that my view is shared by several other people in the supervisory board," Weil said, adding that topic would to be discussed at the next meeting of the supervisory board in mid-November.
Lower Saxony is an influential voice at VW with a 20 percent shareholding.
The plant would expand VW’s total number of factories worldwide to 123 and create a bridgehead to grow sales across eastern Europe and the Middle East.
This is a "huge blow if this does not happen," said Tim Ash, a strategist at BlueBay Asset Management in London. It raises the question of whether Turkey is becoming too big a risk for for investors, he said.
Ford Motor, Toyota, Fiat Chrysler Automobiles, Hyundai, Renault and Honda operate plants in Turkey.
German Chancellor Angela Merkel said on Sunday that she told Turkish president Tayyip Erdogan that its offensive in Syria must be stopped because it risked creating a humanitarian crisis.
European Union countries agreed on Monday to limit arms exports to Turkey, while U.S. President Donald Trump imposed sanctions on Turkey.
Bloomberg contributed to this report
