VW Group to invest Rs 7,900 crore in India, plans new design centre by end-2018

While Skoda Auto India had announced its ‘India 2.0’ project a week ago, its parent Volkswagen Group today revealed further details about its new strategy to accelerate its business in India and gain market share in the growing passenger vehicle market.

The Group has today confirmed a big-ticket investment of 1 billion euros (Rs 7,900 crore) into the project, one of the biggest investments in the automotive sector in India. This will go into the Skoda India and Volkswagen Group India businesses over the next five years, and will be targeted to revive the performance of the two companies and in a way, make a new start in the Indian PV market which is billed to be in the global top three after a few years.

The essence of the new India market growth strategy revolves around VW’s new MQB A0 platform, which will be heavily localised in India and be christened MQB A0-IN. The lightweight platform, which comprises of aluminium, high-strength steel and hot-formed parts in its construction, will spawn a slew of future products, starting with a midsize SUV by CY2020. While the initial focus will lie on the Indian market, the products will also be considered for other emerging markets eventually. The modular platform can also accommodate electric drivetrains and is future-ready.

The India 2.0 project is being led by Skoda India’s managing director, Gurpratap Boparai, and the Czech carmaker has been entrusted with the responsibility to drive the growth of its German parent brand – Volkswagen – in the Indian market in the coming future.

Bernhard Maier: "With our ‘India 2.0’ project we are now creating the right conditions for sustainable growth."

Skoda Auto CEO Bernhard Maier said, “Experts predict that in the next few years India is going to become the third-largest automotive market worldwide. With our ‘India 2.0’ project we are now creating the right conditions for sustainable growth there. Our objective is ambitious, but achievable: together with the Volkswagen brand, we are seeking a market share of up to five percent in the long term, depending on market and segment development.”

Gurpratap Boparai, managing director of Skoda Auto India, added, “With the India 2.0 project, Škoda Auto India and Volkswagen Group India are in an excellent position to optimally confront the dynamics of the Indian car market. In India, we will offer world-class products at prices that amount to a paradigm shift in the automotive industry. We will manufacture the new products on the localised MQB A0 platform, which already fulfils the stricter emission and safety standards that are expected to come into force in India in 2020.”

Gurpratap Boparai: "We will manufacture the new products on the localised MQB A0 platform, which already fulfils the stricter emission and safety standards that are expected to come into force in India in 2020.” 

New R&D centre and expansion of capacity
The India 2.0 project is based on three key pillars, which include the establishment of a new engineering and design centre in Pune by the end of CY2018. The company has already started recruiting engineers for the task and aims to settle for 200 people by mid-CY2019. Moreover, the strategy aims at increasing localisation levels, and the MQB A0-IN will see up to 90 percent localisation to ensure the upcoming products to be priced competitively in the market.

Lastly, the project aims to take Skoda and VW into the volumes territory. While the strategy targets achieving a 5 percent share of the market by 2025, the Group will see capacity expansion of its existing plants over the next few years, in order to cater to the estimated numbers.

Targeting a high level of customer satisfaction
Aftersales and customer service has been, till a little while ago, the weakest link in the Skoda and VW India story in the country. While the products are appreciated for their premium quality yet being good value for the price, the service support and dealer attitude remains second-rate.

Acknowledging and accepting the fact, Bernhard Maier, CEO, Skoda Auto admitted at a company press conference in New Delhi today that the VW Group has not been able to deliver on the customer satisfaction front and that remains one of its major gremlins. The Group has now set its focus clear on improving its aftersales, and it will focus on customer-centricity.

With upcoming products on the MQB A0-IN platform being cost competitive, the company is expecting growth from Tier 2 and Tier 3 cities. Speaking at the press conference, Boparai said, “We will expand our dealer network in semi-urban and urban areas in the near future, and will double our dealer network over the next two to three years in India.”

Skoda Auto India has an annual manufacturing capacity of over 89,000 units at its Aurangabad plant, while Volkswagen Group India has over 200,000 units at its plant in Pune. At present (April-May 2018), Skoda has 0.47 percent of the passenger vehicle market in India, while Volkswagen India has 1.04 percent. While Skoda sells the Rapid, Octavia, Superb and the Kodiaq SUV in the country, Volkswagen India retails the Polo hatchback, Ameo, Vento and the Passat sedans.

Also read: Skoda's 'India 2.0’ project to bank heavily on localisation

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