Volkswagen to make India its export hub, will invest INR 1500 crore on localisation

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Narendra Modi’s ‘Make in India’ initiative seems to be drawing in some foreign interest, this time from German automaker giant Volkswagen. The company plans to make India one of their global manufacturing and export hubs. To kick off, Volkswagen plans to pump in INR 1500 crore to produce material locally for higher cost-effectiveness. Mahesh Kodumudi, chief representative Volkswagen India said in a statement, “We are looking at making India a low-cost manufacturing hub catering to emerging and developed export markets. In 2014, we exported 65,000 cars which is 60% of our production from the Chakan plant. We are looking to export 70,000 cars this year.” Volkswagen is aiming to bump up production capacity at its Chakan and Aurangabad plants in the coming two years.

New 2015 Volkswagen Jetta (6)

“India is and will remain an important strategic growth market for the Volkswagen Group. We are convinced that VW will take on a key role in the Indian automobile market in the long-term. We are driving localisation forward with our new engine assembly plant in Pune,” said Volkswagen AG chief executive Martin Winterkorn. Kodumudi believes that the Indian market has got far more growth potential and there were 24 lakh vehicles produced last year. He thinks this number will grow to 40-45 lakh units per year by 2020. Volkswagen wants to build back its brand and thus plans to bring in the Beetle and Passat saloon somewhere this year. The company also hopes to ramp up its production to 2 lakh units by 2018 and wants to bring in more new models from its Chakan plant, which currently has a capacity of 1.3 lakh units per year.

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Volkswagen plans to bring its iconic Beetle to India before the end of 2015.

Volkswagen thinks that the growth of the Indian automobile industry has been restrained by the constant altering of policies and large currency fluctuations. The carmaker is also in discussion with the government over the latter’s decision to reduce export incentives from 4% to the current 2%. Kodumudi added, “Now we need the government to create stable policy framework and labour reforms, which need to be simplified. This will help gain confidence of foreign investors. We also need to talk about FTA with the EU to help the growth of the industry.” Speaking on the government’s current Foreign Trade Policy Kodumudi said, “This move will hit the company’s export plans. We are hopeful of the government restoring export incentives.”

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