The head of Group Production for Volkswagen AG speaks to Darius Lam about the recent VW-Suzuki deal, the Polo project and the vital importance of the Indian market for VW.
How will you use your recent tie-up with Suzuki to grow in the Indian market? For example, can Suzuki help in the development of your Up small car?
I don’t want to talk about concrete projects in this context because we are just starting to work together and looking forward to intensive cooperation. There is big potential because these two companies complement each other very well and there is almost no overlap on the product side. Suzuki is very strong in key Asian markets like India, Japan and the ASEAN region. VW is strong in Europe, South America and China; so both companies can help each other from the geographical side and Suzuki is strong in smaller cars, in the microcars segment, in the low-price car segment and these are areas where we can look for common projects. What is defined is to have common projects on hybrid cars, on electric cars and all other things especially if we look at India. I see big potential for common projects, for synergies here in India but this has to be worked out and at present here there is no direct work related to the Up. The Up is a project from Volkswagen, which is being developed first for Europe and we are investing in this project for Europe. We are also looking at how to make this model feasible for the Indian market.
How will suppliers benefit from this tie-up between VW and Suzuki?
Naturally volumes and costs are closely linked and we are always looking for scale effects and this cooperation between Suzuki and VW has the potential for better scale effects. This could include areas like purchasing and the new venture could also help us to speed up localisation levels here in India. This has to be worked out and we are starting on this process.
Can you tell us about your upcoming saloon car model?
It is a new saloon car that is longer and bigger than the Polo hatchback and will have a big luggage compartment. Saloon cars in India have a higher positioning and since they are chauffeur-driven, the rear of this car will be better equipped and more comfortable.
How has the new Polo performed in its home market of Europe?
The new Polo is very successful in Europe and just won the Car Of The Year award in Europe. Also, we are sold out for the next three to five.months in Europe and are producing to our capacity in our plant in Europe. I am convinced that this car has big potential in India as well due to its quality and reliability. Another thing that Indian customers will come to appreciate is that VW cars have better residual values compared to the competition. We have tested our cars on Indian roads for thousands and thousands of kilometres to ensure their quality.
How different is the Indian-made Polo compared to its sibling in Europe?
The design, precision and quality of the Indian version is the same as in Europe. We also studied the needs of Indian customers, so the precision of the car is higher for India because of Indian road conditions and we have also improved the horn to suit the Indian driving style. We also strived to be cost- and price-competitive with the Indian Polo.
When will your new Chakan plant reach full utilisation?
We have a capacity to make 110,000 cars per year at this plant and we want to use this capacity as soon as possible. If the market demands that we produce more cars, then we can ‘mirror’ this plant; this can be done at Chakan because we have plenty of land. This means we can double the capacity at this site without too many difficulties. We also have land allocated for a supplier park, which can be developed in the future.
What is the level of localisation of the Polo?
We are starting with 50 percent localisation for the Polo and we know part by part and component by component which ones will get localised every month. We would also like to have suppliers located near our plant. They can produce not just for us for the other manufacturers in the region. This will improve scale economies, lower costs and make them more price-competitive.
What about localisation of your powertrain for the Polo?
This is still an open question and we are investigating its feasibility. The problem is that we are not talking about just one engine and one gearbox. There will be a variety of engines and gearboxes and the volume for each engine is still too low to justify production in India. We will look for solutions to these problems since it is important if we want to grow our capacity and market share in India. n
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