VW group to invest 2,000 cr in India

VW group to invest 2,000 cr in India

New Delhi: Volkswagen AG, the world’s third?largest?car maker, plans to invest at least $379 million (Rs 2,000 crore) in India to boost its share in Asia’s second fastest growing car market, according to a commerce ministry statement.

“This is a group investment, which will be done in this year," John Chacko, Volkswagen Group’s chief representative in India and its president and managing director, said on Thursday, confirming the development. “Majority of it will be utilized at expanding our capacity at our plants in Aurangabad and Pune plants, and product planning."

Part of the proposed investments will be used to expand and strengthen the car maker’s after-sales network and training facilities, Chacko said, adding that the firm does not plan to build another plant immediately.

The firm wants to introduce in India a smaller car than its Polo hatchback or Fabia compact, which is sold under the Skoda brand, a unit of Volkswagen. The auto maker is in talks with its top executives in Germany. A decision is likely to be taken by the end of this year, Chacko had said in an interview in March.

“I would love to bring Up! here, if it was feasible. Everybody has said make it feasible (for the Indian market). But it is not feasible yet," he had said. “We did change Polo (for India) a bit and nobody notices it. But we have. So why not do it for Up!. We are working to try and make it feasible for India. I would like to have a decision by the end of this year, because it takes time to introduce a product like that."

The firm’s plans are in line with its intent to stay in India for the long term, said Mahantesh Sabarad,?an analyst at Fortune Equity Brokers India Ltd. “I don’t think they would be making money in India yet," he said. “This is because their volumes are insufficient to break even."

Trade minister Anand Sharma, who is in Germany to celebrate the 60th anniversary of establishment of diplomatic ties between India and Germany, said in a note that about 600 Indo-German joint ventures operate in India. “FDI (foreign direct investments) inflows from Germany into India are around $4.55 billion and it ranks eighth among investors in India," he said.

Volkswagen, which has been operating in India for more than 10 years and has introduced Audi, Skoda and Volkswagen brands, does not sell low-cost small cars that account for about 65% of the local car market.

While its flagship Volkswagen has more than doubled its market share in the country to over 3% in 2011, Audi has surpassed Mercedes-Benz to become the second largest selling luxury car brand. In comparison, Skoda has underperformed. In small cars, Volkswagen’s Polo competes with Maruti Suzuki’s Swift and Hyundai’s?i20,?while?in sedans, its Vento is pitched against Hyundai’s Verna and Honda’s City.

Asit Ranjan Mishra contributed to this report.