Mumbai: German car major Volkswagen AG aims to source more parts from India for its global operations, and also hopes to triple its annual component sourcing out of India to over €300 million euros (Rs 2,074 crore) over the next 3-5 years.
The carmaker looks to double the number of component suppliers to over 200 to expand its range of spare parts made for global markets. This move, apart from helping Volkswagen source cost-effective components, will also help it increase its localisation to over 90% for its muchawaited small car UP!, which will be launched here in the next two-three years.
The higher localisation will help Volkswagen price its small car aggressively and take on market leaders Maruti Suzuki and Hyundai India.
Mahesh Kodumudi, executive director for components purchasing for Volkswagen group India, told ET: "We are still seeing India as a very competitive sourcing base – there's a cost advantage of at least 10-15% over Western Europe. And having worked with Indian vendors over the past few years, their capabilities too have matured and we do see them playing a bigger role."
Volkswagen plans to invest close to €250 million (Rs 1,728 crore) over the next few years on tooling and vendor development as newer models like UP! are being introduced in the market. The company has already invested a similar amount since its entry.
The German company today sources power train components, engine and transmission parts, metallic parts, sheet metal and a lot of small plastic parts. The company will be sourcing close to 50 million euros (Rs 432 crore) of plastic parts annually.
This is part of an overall plan to source close to €1 billion worth components from India, both for domestic and global operations. Volkswagen AG sources €70-80 billion worth of components annually from across the world. Increased localisation will also help the company derisk itself of currency fluctuations.
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