Volkswagen to set up Rs 1,500-cr plant in India

Greater Noida: To boost sales in India, German auto maker Volkswagen is planning to expand production capacity and introduce a slew of new models. The group, which had put on hold investments and new product launches due to uncertain economic conditions in the Indian market, said it was looking at investing Rs 1,500 crore over the next five years to set up a diesel engine manufacturing facility.

Mahesh Kodumudi, president and managing director of Volkswagen India and head of Volkswagen Group Sales India, said, “We have not launched a new product lately but that should not be construed as our lack of interest in the Indian market. We were consolidating our operations and are now ready for our next phase of expansion. We will be investing around Rs 1,500 crore roughly over the next five-six years.”

The resources would partially be utilised to set up a diesel engine manufacturing unit. The company is examining possibilities to set up the facility, a final decision on which would be taken over the next few months.

Expansion
Besides, the engine manufacturing unit, the company is looking at expanding capacity to 200,000 units at its Chakan facility from 130,000 units currently.

“Our target to gain eight-10 per cent share in the passenger vehicle market may get delayed because of the uncertain political and economic conditions. But we do intend to be a volume player. We have to play in the compact SUV segment, sub-four-metre sedan segment, multi-purpose vehicle category and if possible go down to a segment where small car UP can compete. We are studying various options for product interventions,” added Kodumudi. The first of the new set of products from Volkswagen is expected to hit the market by 2016.

The engine plant in India will help the carmaker reduce costs and expand sales volumes by competing more aggressively with established players such as Maruti Suzuki and Hyundai. The petrol and diesel engines of VW are mostly imported from group facilities from South Africa, Czech Republic and Germany.

The company has to pay import (basic customs) duties on fully-assembled engines. Since the orders have to be made much beforehand (lead time for production and shipping), it additionally reduces flexibility in manufacturing.

Cost savings are important for being price competitive in the mass segment. The group's volume models made at Chakan include the Volkswagen Polo and Vento, Skoda Fabia and Rapid.

Kodumodi said, “One of the factors that delayed the launch of small car UP in India is -- we have to get the price-cost equation right. We were consolidating operations and adding depth to localisation programmes to be more competitive.”

Apart from Volkswagen, two wheeler maker Honda Motorcycle & Scooter India announced plans to invest Rs 1,100 crore to set up a new plant in Gujarat in its fourth facility in the state.

The new units will become operational in the second half of 2015. Besides, Japanese automobile maker Isuzu Motors also announced an investment of Rs 3,000 crore.

The company plans to set up a manufacturing facility, spanning over 107 acres, in Chennai. The proposed plant is expected to be operational by early 2016 and will create 2,000-3,000 direct jobs.

Volkswagen to source more parts from India for global operations

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.

Volkswagen India sales up 67% in October

NEW DELHI: Volkswagen today reported a 67.30 per cent year-on-year increase in its India sales to 7,266 units in October. The company had sold 4,343 units in the corresponding period last year, Volkswagen said in a statement. Compact car Polo and sedan Vento continue to be the backbone for the brand, with a total of 6,814 units sold in October, 2011, the company said. "Our action model strategy has once again proved to be very successful, with the Polo and the Vento Breeze being a huge attraction for customers during the festive season," Volkswagen Group Sales India Member of Board and Director, Volkswagen Passenger Cars, Neeraj Garg said.