A common engine plant for the Volkswagen, Skoda and Audi brands in India may start production by end-2014, with a final decision by year end. The location will likely be the Volkswagen Group's Chakan facility, in Maharashtra.
Two top company officials told Business Line that the move will help the carmaker reduce costs and expand sales volumes by competing more aggressively with established players such as Maruti Suzuki and Hyundai.
Dr John Chacko president and MD of Volkswagen Group India said that “This is one of the projects we are working on, and logistically speaking, it will be at Chakan. We need two years before it starts operations. A decision will be made by end of the year.”
Mr Michael Perschke head at Audi India said that “We will assemble engines at a group level. It will likely happen at Chakan, but no clear decision on the location has been decided yet.”
Key issue
Apart from attaining the right volumes to make an engine plant feasible about 1,000 units a day Volkswagen's decision also depends on the Maharashtra Government's stand on the VAT refund issue.
Dr Chacko said that “Big investments plans are on hold right now, as we await a response from the State Government.”
The Group has only “small-scale” assembly operations for engines at Aurangabad, where it assembles the premium Volkswagen and Skoda models and Audi's luxury cars.
The petrol and diesel engines are mostly imported from group facilities from South Africa, Czech Republic and Germany. On these engines, it has to pay import (basic customs) duties about 7.5% for fully assembled engines. Since the orders have to be made much beforehand (lead time for production and shipping), it reduces flexibility in manufacturing.
Cost savings are important to be competitive in the mass segment. The group's volume models made at Chakan include the Volkswagen Polo and Vento, Skoda Fabia and Rapid.
Source - Business Line
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