Volkswagen's big India plans

German auto major Volkswagen is planning to make India a low-cost manufacturing hub, catering to both the emerging as well as developed markets.

Also, as part of Prime Minister Narendra Modi's 'Make in India' initiative, the company will be investing Rs 1,500 crore (Rs 15 billion) for localisation and produce cost effective products, Volkswagen India chief representative Mahesh Kodumudi told PTI on the sidelines of the Hannover Fair.

"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 per cent of our production from the Chakan plant," Kodumudi said.

"We are looking to export 70,000 cars this year," he said.    

The company will also increase production capacity at the Chakan and Aurangabad units in the next two years.

Volkswagen AG chief executive Martin Winterkorn said: "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."

VW plans to increase production to 200,000 units by 2018 and add more new models from the 130,000 units Chakan plant.

Kodumudi said the company is looking at getting into top down segment and focus will be on building the brand.

The company is planning to reintroduce the Passat sedan and a new model of the iconic Beetle this year.

India has good potential to grow.

Last year the country produced 2.4 million units and this year the target is 2.5

million, which will grow to 4-4.5 million by 2020, he said.

Kodumudi, however, pointed out that the frequent policy change and large currency fluctuations have hampered growth of the industry in last two years.

"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," he said.

The company is also talking to the government over the cut in export incentives from 4 to 2 per cent in the recent new Foreign Trade Policy.

"This move will hit the company's export plans.

“We are hopeful of the government restoring export incentives," he added.