New Delhi: The Volkswagen group has decided to invest Rs7,900 crore (€1 billion) under its India 2.0 plan to revive its fortunes. The investment will be made through its sister brand Skoda, with the two brands seeking to have a combined market share of 5% by 2025.

The India 2.0 initiative will focus on increasing localisation of products and beefing up the company’s existing production capacity, besides setting up a new design and development centre in Pune.

The first product, a utility vehicle, will be launched in 2020. Skoda will also look to develop India as a base for developing compact cars for exports to other emerging markets.

Through its Czech subsidiary, the German car maker will introduce the MQB A0 platform in India, which will help it build multiple products in the utility vehicle and hatchback segments.

Ever since the diesel scandal came into public domain in 2016, Volkswagen’s and Skoda’s domestic sales have been on a steady decline. Introduction of new models such as the Ameo (a compact sedan) could also not recover the lost volumes for the company.

Bernhard Maier, chief executive officer, Skoda Auto, said though Volkswagen as a brand has struggled in India, the group has recently entrusted Skoda with the responsibility to turn around the group’s fortunes.

On 14 August, 2017, Mint was the first to report that the Volkswagen AG board will consider a proposal to introduce its Modular Transverse Matrix (MQB) platform in India to substantially boost the company’s portfolio.

Skoda has already started working on the development and design centre in Pune and is expected to hire 200 engineers this year.

According to Maier, the India 2.0 project will emphasise on increasing localisation of vehicles to above 90%, improving customer satisfaction, cost rationalisation and deciding on the right time to introduce a particular product.

“We will not be a marginal player anymore in India. We are setting up a new design centre and all new vehicles will be designed there and the production capacity of the manufacturing units will also be increased," said Gurupratap Boparai, managing director, Skoda Auto India Pvt. Ltd.

In the first phase, Skoda will develop the platform with a focus on the India market and in the second phase the company will be assessing the possibility of exporting vehicles from India.

The company, however, did not earmark any investment for introducing new products with electric powertrain in India. Globally, it will launch 19 new electric vehicles by end-2020. “When the time will be right with the availability of infrastructure, we can think of introducing these products here. We cannot introduce every new technology to each and every market at the same time," added Maier.