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New auto policy may delay Skoda's Indian venture

Volkswagon group subsidiary Skoda Auto's Rs 10 billion car project in India will be delayed because of the government's new automobile policy which requires foreign car makers to achieve 70 per cent localisation within five years, a senior company official said.

However, the company does not intend to pull out of the country, Skoda Auto's director of Indian operations Imran Hassen said.

''This clause will delay our ambitious project for India as we will simply not be able to achieve 70 per cent localisation within five years. It is totally unrealistic,'' he added.

The company, Hassen said, has no inhibitions about transferring technology to India, ''but it should be done in due course. We have a clear intention of fulfilling the Indian requirement and need at least seven to eight years for reaching that indigenisation level.''

This, he says, is not only the opinion of Skoda but of several global car manufacturers and the Automobile Component Manufacturers Association.

Company officials have held talks at the directorate general of foreign trade and the finance ministry to put across their point.

''We have been regularly holding talks with the government officials. But we are not seeking any concessions. We want to discuss a project which has the chance to be successful internationally. We want to compete in the market, both in India and abroad and want realistic steps and measures for that,'' he added.

''The question is only to sort it out and we will sort it out. But if this issue is not resolved, the project will be delayed,'' he said. ''However, that does not mean that we will call off the project. India is a huge market and there is no question of pulling out of the country.''

The company had earlier planned to submit its investment proposal to the Foreign Investment Promotion Board by February. Now the application will be filed only after clarifying the issue of localisation.

As a result, start-up production will commence only in the second half of 1998.

Another Volkswagon subsidiary Audi will also set up a joint manufacturing facility in India. The unit will house the production lines for both companies. However, the site for the project has not been fixed as yet.

According to Hassen, the company would like to locate the plant in Maharashtra but the exact site has not been finalised. ''But if we get a better and more attractive site in any other state, we would not mind setting up the facility there.''

Company sources said Audi would manufacture around 5,000 to 6,000 cars while Skoda would look at manufacturing 60,000 cars annually in the first phase.

While Audi would launch its latest A6 and A4 models in the country, Skoda will roll out its popular Felicia model both as a car and as a pick-up van. Another model -- Octavia, a mid-size saloon which was launched in Europe last year -- will be introduced later. Felicia will be available in both its petrol and diesel versions.

The company will unveil the models along with a light commercial vehicle at Auto Expo 1998, which will inaugurated in New Delhi on Thursday.

UNI