India-EU FTA Could Help Volkswagen Bring Niche Models to India: CEO

Volkswagen sees the India-EU Free Trade Agreement (FTA) as an opportunity to expand its product portfolio in India, with select niche models from its global line-up. However, the German carmaker will take a long-term approach and is expected to evaluate market conditions before finalising which models could be introduced.

Speaking during his India visit, Volkswagen Brand CEO Thomas Schäfer said the FTA could provide an opportunity to bring niche products to India and offer customers a wider range of models. He did not disclose which vehicles are being considered.

Volkswagen is simultaneously preparing for a broader expansion of its India operations. A locally produced sub-four-metre SUV based on the Skoda Kylaq has already received global approval and is expected to arrive next year. The model is expected to become an important volume driver for the brand and expand its reach into one of India's largest passenger vehicle segments.

Volkswagen's India Strategy Gains Global Importance

Volkswagen's renewed focus on India comes as the company reassesses its global business strategy amid changing trade policies, geopolitical uncertainty and increasing regionalisation of vehicle production.

Schäfer said the traditional model of developing vehicles primarily in Europe and exporting them to other markets is changing. Volkswagen is instead looking to adapt its business model to individual regions and make greater use of local capabilities.

India is expected to play a larger role in this strategy, not only because of its growing domestic vehicle market but also because of its engineering, technology and research capabilities. Volkswagen already uses India as an export base, with vehicles manufactured locally being shipped to more than 40 markets. Mexico is among the major destinations for vehicles produced in India.

The company sees exports as an important way of improving scale and supporting the business case for new products. The upcoming compact SUV could also benefit from export opportunities once production begins.

Volkswagen Keeping Powertrain Options Open for India

Volkswagen is also evaluating a broader range of powertrain technologies for India. Its current local portfolio is dominated by turbo-petrol engines, but the company has access to CNG, diesel, flex-fuel and electric powertrain technologies in other markets.

Schäfer said Volkswagen will introduce these technologies in India when market conditions make localisation viable. The company is therefore keeping its options open as India's powertrain mix continues to evolve.

While Volkswagen expects electrification to become increasingly important over the long term, it does not intend to commit exclusively to one technology in the immediate future. Changing consumer demand, fuel prices and market conditions will determine the timing of future powertrain introductions. The company is also evaluating its next-generation products and platforms for India, although specific details have yet to be finalised.

Cost Reduction Remains a Priority for Volkswagen in India

Cost competitiveness remains another key focus for Volkswagen in India. According to Schäfer, the company has spent the past few years working on reducing its cost base while ensuring that locally developed products continue to meet Volkswagen's quality and brand requirements.

India is expected to play an important role in this effort, both through cost-efficient vehicle development and manufacturing. Volkswagen is also looking at shifting some production and development activities towards lower-cost locations. The combination of local manufacturing, exports and a broader product portfolio could help Volkswagen improve economies of scale in India.

With the upcoming compact SUV set to expand its presence in the volume market and the India-EU FTA potentially opening the door to niche imports, Volkswagen is preparing for a broader India strategy. The company is expected to make decisions on additional products and powertrains after assessing market conditions over the coming months.