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VW India head Gurpratap Boparai.
VW India head Gurpratap Boparai.

India needs to build greater scale to localise more: Skoda Auto Volkswagen

The top executive at the local unit of Volkswagen Group, one of the world’s largest passenger car manufacturers, said it is not possible to have localised parts so soon

A larger manufacturing scale is required for India’s passenger car market to drive deeper localisation of parts in line with the central government’s Atmanirbhar Bharat program, Gurpratap Boparai, managing director, Skoda Auto Volkswagen India Pvt Ltd told Mint in an interview.

Senior Union ministers including Nitin Gadkari and Piyush Goyal in the government have been urging the automakers over the past months to reduce their dependence on imports, increase exports and make India a global manufacturing hub for automobiles and auto components.

The top executive at the local unit of Volkswagen Group, one of the world’s largest passenger car manufacturers, said it is not possible to have localised parts so soon.

“With these parts, if you change the source, you will have to once again go through the testing cycles and may need to re-homologate the car. These things take time and a lot of money," he argued.

Boparai said that India needs to build a greater scale as the domestic market, which continues to face several challenges including high taxes and economic slowdown, has not reached a point where localising every part makes sense.

“If there is to be a concerted strategy to make more cars in India, we need to also make it viable for the manufacturers to come and produce here, not only for the domestic market because that’s not enough but also for the global markets," he said, adding that to lure companies to India, the government needs to make it a more attractive manufacturing destination from other parts of the world where these OEMs are currently producing cars.

Skoda Auto Volkswagen India sees manufacturing of cars as an expensive affair in the country. This comes even as the Narendra Modi led central government aims to attract global investments in manufacturing while positioning India as a suitable manufacturing hub for the world.

“Land and electricity are extremely expensive in India as compared to several other countries, also our raw materials including steel, aluminum, are far more expensive than, lets say, China," Boparai said, adding that the local manufacturing units have to also face severe infrastructural challenges.

“The logistic costs are higher (in India) because traffic is slow moving, connectivity isn’t always great. I have to say that our industry as a whole is extremely cost efficient but if your raw materials, electricity and other overheads make it more expensive than the rest of the competing nations, your competitiveness does take a hit," Boparai said.

“If you want to be an exporter and if you are expecting others to open their markets for you, you also will have to open your own market a little bit. There should be no fear, we do have our own competitiveness. Where we do not have competitiveness is the input costs (in manufacturing)," Boparai said.

In an attempt to make India a globally competitive manufacturing destination, the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, recently released a draft strategy paper with a slew of proposals to make India a globally competitive manufacturing hub for sectors including automobiles.

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