VW group to invest 1 Billion more in India

The Volkswagen Group plans to invest 1billion euros (Rs 7,600 crore) more in India, several people in the know said, as the world’s largest carmaker seeks to launch a flurry of vehicles and expand capacity to shrug off its underperformance in one of the fastest-growing markets.

The group will spend the money to set up a new manufacturing line at its existing facility at Chakan in Pune, build an engineering centre and develop products, these people said, speaking on the condition of anonymity. Developing electric vehicles is also under consideration, they said.

The German auto major is reworking its India plan after an aborted attempt for a partnership with Tata Motors to make products for emerging markets, where the most crucial factor that sells a vehicle is its affordability. Despite the group being present in India for more than a decade and half, it could garner only a less than 2% market share between the Volkswagen and Skoda brands.

Positioning as a premium brand that sits above the likes of market leaders Maruti Suzuki and Hyundai Motor has hurt its performance. The group has now decided to come out with an affordable portfolio on its own for emerging markets, based on the MQB-A0 platform. The new models will be heavily localised to keep the cost low.

Czech unit Skoda Auto is driving this India and emerging market strategy for the group. Skoda chairman Bernhard Maier visited India towards the end of October, followed by a contingent of 40 senior engineers who came to understand the critical issues here before executing the plan. The group has also conducted one-on-one workshops with over a dozen-and-half vendors to put finishing touches to its emerging market strategy, the people said.

The Volkswagen board discussed the progress of the plan on December 19 and is hopeful of finalising a blueprint within a quarter, they said. About half a dozen cars are planned with the new MQB-A0 underpinning, including a hatchback each from Skoda and Volkswagen positioned in the Maruti Baleno and Hyundai Elite segment, a mid-size sedan that will replace the Rapid and Vento, and a B-segment SUV that will be benchmarked against the Volkswagen T Cross to take on the Hyundai Creta. Discussions are currently ongoing on the SUV project, codenamed VW216.

“We believe we are in a good position to tackle new segments in the Indian market now,” Skoda chairman Maier told  in a statement. “We will invest a substantial amount into the Indian market. We are in the process of ascertaining the total investment,” he said, but declined to get into the specifics. The company is studying volume scenarios of 1,80,000, 2,50,000 and 3,20,000 units for capacity expansion. A chunk of the production will go towards exports.

Till the time the MQB-A0 car project goes fully on stream by 2022-2023, an existing platform is being upgraded to meet requirements in overseas markets.