Volkswagen not to set up plant in India

After scouting for a plant site in India for over a year, German automobile giant Volkswagen has finally decided to can its big plans for the country.

Volkwagen has decided to let its Czech arm, Skoda Auto, which has established itself as a force in the C-plus segment, implement the group's growth strategy in India.

Second thoughts

Volkwagen has decided to let its Czech arm, Skoda Auto, implement the group's growth strategy in India Volkswagen was expected to foray into the passenger and commercial vehicle segments with an investment of nearly Rs 1,500 crore Skoda will start using India as a hub for outsourcing its vehicles to other South Asian markets from 2004

"Volkswagen has decided to let us represent them in India. They may come here after three or five years, but for now Skoda will be the sole representative of the company in India. Volkswagen will continue to concentrate on China in the Asian market," said Karl-Gunter Busching, member of the board of management, production and logistics, Skoda Auto.

Volkswagen was expected to foray into the passenger and commercial vehicle segments with an investment of nearly Rs 1,500 crore (Rs 15 billion).

Skoda will start using India as a hub for outsourcing its vehicles to other South Asian markets from 2004.

"We will start with neighbouring markets like Nepal, Bangladesh and Pakistan before looking at the bigger markets in South Asia," said Busching.

The company is also talking to a number of local automobile ancillary companies to outsource components for Skoda's European operations.

The company recently shifted gears from the semi-knocked down kits mode of assembly to completely knocked down kits.

It will move its operations to a greenfield facility in Aurangabad by January 2004.

Consequently, its production will be ramped up from 8,000 units a year to 15,000 units.

Volkswagen's decision comes as a surprise to most industry observers because senior company executives, including head of the India project team Helmuth Schuster and chief adviser Ashok Jain, have been flying in and out of the country meeting state chief ministers and government officials to discuss the possibility of setting up a facility in India.

Schuster and his team met senior officials in Chennai last week to explore the possibility of setting up a base in Tamil Nadu.

Skoda has decided to accelerate its growth in India. Its D-segment, super-luxury car Superb will hit the streets by March 2004.

Superb, which will be imported as a completely built unit, will compete with the Toyota Camry and the Opel Vectra and will be priced in the Rs 20 lakh (Rs 2 million) plus range. The C-segment Lauren-Klement will be launched in April 2004.