VW to invest Rs 720 cr on new compact sedan for India

Mumbai: Volkswagen India Pvt. Ltd, the local arm of German car maker Volkswagen AG, will be investing Rs.720 crore on manufacturing a new compact sedan which is being specifically designed and developed for the Indian market, the company said on Wednesday.

This is part of the Rs.1,500 crore (around €176 million) investment that was announced by the firm at the beginning of 2014.

The production of the new model at its Pune plant is scheduled to commence in the first half of 2016 after an unveiling at the Auto Expo in February.

India is one of the strategic markets for Volkswagen and it expects it will be one of its largest by the end of the decade. “We are following a long-term investment plan in India and with our latest investment we have reaffirmed our confidence in this growing automotive market,” Andreas Lauermann, president and managing director of Volkswagen India, said in the statement.

This is the second step of investment after the engine assembly plant a year ago, he said. “We will continue to invest further in increasing our productivity and efficiency,” he added.

In an intensely competitive passenger car market in India, which is increasingly being ruled by new models, the launch of the compact sedan model by Volkswagen comes after a hiatus of five years. This will be the first all-new model in India from the world’s second-largest auto maker since it entered the country with the Polo and Vento models in 2010.

Its sales in the domestic market have been tepid. It sold 26,479 units from April to October, up 6.18% over a year ago, according to industry lobby Society of Indian Automobile Manufacturers. The firm has been shipping more models to overseas markets from here than what it sells locally. It exported 41,198 units in April-October, up 4.4% from a year ago.

The new model will help the company focus on the specific requirements of Indian customers, Michael Mayer, director-passenger cars, Volkswagen India, said.

“It shows that emerging markets like India are on top of their priority list,” Puneet Gupta, associate director at IHS Automotive, a sales forecasts and marketing firm, said.

The announcement comes even as Volkswagen is in the process of responding to the notice issued by the Indian government over its alleged violation of emission norms.

In a 30 October statement, it said it will present the findings of an assessment being conducted on the impact of its emissions scandal on locally produced vehicles by 30 November.

In September, Volkswagen admitted to irregularities concerning a software used in diesel engines in “some 11 million vehicles worldwide”. As many as 314,000 Volkswagen Group cars in India are fitted with engines from its EA 189 diesel family that’s at the heart of the emissions scandal that the company is battling in the US and Europe, Mint reported on 5 November, quoting a government official.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.