Volkswagen (VW) plans to increase local content in vehicles produced in India from the current 80% to 90% as part of its strategy to reduce cost, Moneycontrol.com reported last week citing Steffen Knapp, director of Volkswagen Passenger Cars India. To realize this target, the German automaker plans to begin local production of engines and transmissions. VW currently imports engines and transmission in kits and assembles them at its plant in Chakan, Maharashtra (India).
“To move to the next phase, growth can come on the basis of [localization] and that can come only on volume, which can happen on [new] investments," Knapp was quoted saying. "We are investing which we need for capacity in order to give us the base for our cost. We have around 82% localization on the Polo, Ameo, and Vento and we need to [achieve] 90% in order to be successful. It will also include powertrain,” Knapp said.
Significance: VW has been present in the Indian automotive market for over a decade now. However, the German automaker has a marginal market share in India amid stiff competition from Japanese and Korean automakers. VW is reportedly working on a comeback in India, dubbed internally as “India 2.0”, which involves a fresh round of investments, a renewed product lineup, and higher localization. The company is considering investing a minimum of INR80 billion (USD1.2 billion) over the next few years in India, according to Moneycontrol.com. The automaker has invested EUR825 million at its Chakan plant, which has annual production capacity of 200,000 units. In terms of revamping its product lineup, VW is planning to launch a compact SUV, based on its all-new MQB A0 platform and targeted at the buyers of compact SUVs such as Hyundai Creta, the current market leader in the segment. “As a logical step we are looking at the A0 SUV segment, which is one of the fastest-growing segments. These are not the sub-4 meter class,” Knapp said. However, the automaker is not considering any model below its entry-level Polo car in India.
