Volkswagen to invest US$1.1bn in India

The latest investment plan for 2019-21 by the German automaker comes as part of its ‘India 2.0’ programme within which the company is aiming to claim 5 per cent market share by 2025

July 2, 2018

Under the investment, Skoda, one of Volkswagen’s subsidiaries, will set up an engineering research and development (R&D) plant at Pune, the company’s India headquarters

Volkswagen will also expand capacity at its manufacturing plants in Aurangabad and Pune, in order to support new model launches and sales expansion in tier 2 and tier 3 cities

Volkswagen Group plans to create as many as 5,000 direct and indirect jobs through the new facility and expansion of the existing ones that currently employ around 5,000

Volkswagen’s ‘India 2.0’ programme is in line with the Government’s ‘Make in India’ movement which has sought to boost indigenous manufacturing and sourcing of components

German auto manufacturing giant Volkswagen AG plans to invest around US$1.1 billion over 2019-21 to fuel its ‘India 2.0’ programme, according to media reports on July 2nd citing a company statement. The programme aims to increase Volkswagen’s share of one of the world’s fastest growing passenger vehicle (PV) markets to 5 per cent by 2025, led by the Skoda Auto brand, from the current 2 per cent. India’s PV market was reported at around 3.3 million in 2017-18. To aid this plan, Skoda, one of Volkswagen’s subsidiaries, will set up an engineering research and development (R&D) plant at Pune, the company’s India headquarters. Volkswagen will also expand capacity at its manufacturing plants in Aurangabad and Pune, both in the state of Maharashtra, in order to support new model launches and sales increase. The company has steadily expanded its sales network in India and is now targeting tier 2 and 3 cities.

The latest investment will mark the company’s biggest for a single market, Skoda Auto’s Cheif Executive Bernhard Maier told the Press Trust of India. Mr Maier added that the new R&D plant, expected to be completed by end-2018, will hire up to 250 engineers. Volkswagen Group plans to create as many as 5,000 direct and indirect jobs through the new facility and expansion of the existing ones. Volkswagen currently has about 5,000 employees working at its various locations in India. The company aims to launch two models each from the Skoda and the Volkswagen brands over 2021-25. This, according to Mr Maier, will help Volkswagen effectively compete in a market which is anticipated to grow to as much as 6 million PVs by the end of next decade. Besides catering to the local Indian market, Volkswagen will continue to export to other markets, especially in the developing regions, from its Indian plants.

Volkswagen’s ‘India 2.0’ programme is in line with the Indian Government’s ‘Make in India’ movement which has sought to boost indigenous manufacturing and sourcing of components. The German group has already invested around US$675 million to its Pune plant – reportedly the biggest investment by a German company. The new programme will increase Volkswagen’s localisation of vehicle manufacturing to above 90 per cent, which is aimed at improving the company’s client interactions in the Indian market, besides increasing profit margins. A number of foreign carmakers, representing premium to mass-market segments, have taken up vehicle assembling and car parts manufacturing in India owing to the country’s advanced and cost-effective manufacturing environment. Indian automotive sector, is expected to reach as much as US$280 billion by 2026. It has received FDI worth US$18.4 billion over 2000 to 2017.

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