Minister of Transportation Yeh Kuang-shih recently announced that the Ministry would soon begin studying the feasibility of building a rail line connecting Hengchun to Fangliao, calling it a "very important upcoming task". When asked by a reporter he also said that an extension to Kending is a possibility.
While I hope this does turn out to be feasible, I do wonder whether this should be a priority compared to other projects, like expanding capacity around Taipei and Taoyuan, building a direct rail line between Taipei and Yilan, or even adding branches or a second main line between Taichung and Tainan. All those projects would affect far more people on a daily basis, whereas Yeh claims the purpose of this rail line would be to attract tourists rather than locals. Maybe tourist traffic will turn out to be enough to justify this line, but the article implies that Kending only gets high numbers of tourists at certain times. If that is the case then bus-only lanes might be a more cost-effective solution. This focus on tourist infrastructure is a common theme in Taiwan, and while I'm not sure what the reasons for it are, I think Yeh's comment that "rail construction is a never-ending job" hints at a desire to find excuses to keep building things (though to be fair there are plenty of worthwhile projects that need to be done).