VM Motori to set up diesel engine plant

While refusing to divulge the name of the vehicle manufacturer, Mario Ravanini, representative of the company, told Autocar Professional that it could be a new manufacturer which is planning a production unit at Chennai or an existing player for light trucks and large passenger cars or SUVs.

According to industry sources, it could be a new light truck proposed by Ashok Leyland out of the Ashok Leyland-Nissan joint venture. There have been talks of Kia Motors of South Korea planning a facility in Chennai by next year and Peugeot scouting for land in Andhra Pradesh and Tamil Nadu.

Ravanini said Motori had sold the license of its diesel engines to Hyundai about 10 years ago and the carmaker had been manufacturing them by leveraging its own capability. The Hyundai Santa Fe is believed to be sporting the licensed engine. Recently, Hyundai announced its plans to set up a new diesel engine plant as well.

Adding a new twist to the Italian engine maker’s tale is a recent announcement by the European Union clearing Italian automotive group Fiat’s partial acquisition of VM Motori.

Fiat has bought a 50 percent share of VM Motori in February 2011 from Penske Corporation of the US, and has announced it would manage the company jointly with its US rival General Motors, which owns the remaining 50 percent of the shares.

The commission, which is the EU’s anti-trust authority, said in a statement, "the combination of VM Motori’s diesel engine manufacturing activities with those of Fiat would lead to relatively limited horizontal overlaps which would not raise competition concerns."

Maruti Suzuki’s diesel engines are licensed from Fiat which also supplies to Tata Motors under its Indian collaboration with the carmaker. Ravanini had remarked that VM Motori’s diesel engines were larger than those produced by Fiat.

Orders in the bag

The new VM Motori plant meanwhile is expected to attract an investment of Euro 30 to 40 million with a minimum output of over 30,000 engines per annum. Orders are already in the company’s kitty, according to Ravinini, with VM Motori eyeing SUVs on the line of Toyota Landcruiser Prado.

Motori’s product USP is believed to be its large engines and its ability to cater to specific customer requirements. “OEMs normally have captive engine plants and these cannot fit other vehicles,” explained Ravanini. He added that the presence of skill competencies, knowledge of the English language and professional knowhow have attracted Motori to India. Though the engine producer has maintained contacts with Indian companies for several years, it has not finalised any business agreement so far.“The numbers were not large enough to justify it. Volumes are now growing faster and we think the Indian market is going to be large enough for large volumes and for localisation of our engines, “said Ravanini. He negated the idea of customers importing diesel engines into India as it involved heavy import duties.

Motori is currently undertaking a feasibility study on the proposed facility, approvals for which are expected to take another year. Then a second detailed feasibility study would be undertaken including the scout for land, with production expected to go on stream by end-2013.