The Hindu Business Line : How Volkswagen is saddling up for India

After much speculation and controversy, German automobile giant Volkswagen AG's plans for the Indian market have finally taken a clearly defined roadmap. The company, which recently announced that it would invest around Euro 410 million (approximately Rs 2,400 crore) to build a car manufacturing plant near Pune, has now announced plans to join the already growing list of foreign automakers looking at the high-volume domestic small-car segment.

The foreign media has been talking about VW planning a specific car for emerging markets — a first for the company. Volkswagen has a number of small cars in its global portfolio. But these will not match the Indian definition of a small car in terms of price positioning.

Most of VW's compacts, such as the Polo, the Golf, the Eos and the Fox, will be very expensive if homologated for the Indian market. The VW Golf Cabriolet is sold in India through exclusive importers-cum-dealers of the company at super luxury sedan prices.

Made for India

So, it came as no surprise when, earlier this week, Volkswagen's Chief Financial Officer, Mr Hans Dieter Potsch, said that the company will develop a compact car `specifically tailored to the needs of the Indian market.' The car is expected to be on the lines of the Polo, which is sold in Europe. The car will compete in the premium small car segment with the likes of the Maruti Swift and the Hyundai Getz. It will be customised for Indian needs but VW will have similar versions of the car selling in China and Russia.

The company's upcoming Pune facility will have a capacity to produce up to 1,10,000 vehicles a year when it starts production in 2009 and the cars manufactured here are expected to have a high local content. The new plant will create 2,500 jobs.

Meanwhile, Volkswagen's first model rollout in India will be as early as 2007. VW plans to first start assembling cars at Skoda Auto's (its group company) Aurangabad facility from mid-2007. It will start by producing models such as the Passat sedan. In what could be stiff competition for the Porsche Cayenne, which is already sold here, Volkswagen will also sell its Touareg SUV (built on the same platform as the former) and Phaeton luxury sedan models in India after importing them as completely built units.

Volkswagen is also setting up a new marketing and sales subsidiary in India, which will commence operations in January 2007.

The new company will handle sales for the Group brands — Volkswagen, Skoda and Audi.

Mr Potsch also said that the company may look at setting up an assembly unit for group brand Audi as well in India. Audi's A4, A6, A8, TT coupe and the Q7 SUV are already being imported and sold in the Indian market.