Volkswagen gears up for India small car plan

Volkswagen, which recently announced its intention to set up a greenfield plant in Chakan near Pune, is now working out its product mix for the Indian market. The current thinking involves producing 90,000 units of a four-cylinder diesel and 35,000 units of a (four-cylinder) petrol engine option. Interestingly, 19,000 units have been earmarked for a three-cylinder petrol which means that the first phase will see 1.44 lakh cars being produced.

Clearly, the idea is to qualify for the small car definition (four metres in length with engine capacities not exceeding 1200cc for petrol and 1500cc for diesel) as announced in the 2006 Budget. VW could even play it safe and confine length to 3.8 metres should the Government decide to adopt the norms prescribed in the Automotive Mission Plan.

The fact that the company has outlined more numbers for diesel goes in line with the auto industry’s outlook for the future. The next few years will a greater percentage of diesel cars in India and companies like Maruti, Tata-Fiat and Hyundai are already working aggressively in this direction.

VW has already made it known that it will manufacture a completely new small car for India on the lines of the Polo. At the time of the Delhi press conference last November, it had earmarked production of 1.1 lakh cars at an investment of Rs 2,500 crore. The small car was intended to take on the likes of the Tata Indica, Maruti Swift and Hyundai Getz.

The plant will also have a press/paint/body shop quite unlike its subsidiary, Skoda whose Auranagabad facility is largely an assembly line. It is here that VW will put together the Passat (the Audi will also be assembled here) while focusing on mass manufacturing in Chakan. It also plans to import the Phaeton and Touareg as part the brand-building effort.

Vendors say that VW is extremely aggressive about India and would like to see numbers grow rapidly over the next few years. Local content will start at 50 percent but the idea is to increase this to 75 percent quickly. This would mean that vendors have a windfall in store except that they will have to reckon with an extremely competitive costing structure and high quality levels. They will also have the opportunity of participating in some of VW’s global car programmes.

MURALI GOPALAN