Volkswagen, the German auto giant, has gone one step ahead of its European and Japanese rivals to save cost and make cars more affordable in India.
The VW group will integrate all of its manufacturing facilities in India to contain costs and check on uninterrupted supply of auto parts. This is perhaps the first strategy of its kind to be seen in the country among global car makers.
Manufacturing plants of Skoda, VW and the new proposed Audi plant would be designed in such a way that it can produce cars of any of the group companies. The VW group owns the Skoda and Audi brands.
The current models of Skoda Auto including the Fabia, Laura, Octavia, Superb and future launches such as the Roomster (MPV) and Yeti (SUV) can be produced in VW's plant in Pune or at Audi's facility.
Similarly, VW's models such as Passat, Touareg, Phaeton, Jetta, Polo/Golf and Up!, can be produced at Skoda or Audi's facility. Both VW and Audi are currently using Skoda's facility to locally assemble the Passat and A6, respectively.
Industry analysts feel that this strategy can prove vital in keeping manufacturing and other costs down, avoid supply deficiencies and surplus investments.
The VW group will thus be able to amalgamate all its manufacturing lines into one production hub and thereby evade any production constraints in the future.
Fred Kappler, Head (sales and marketing), Skoda Auto, said, "Skoda's and VW's manufacturing facilities and our key supplier base are centered in the hub of automobile production in western India. We will have a pure advantage in production. Any of our (Skoda) models can be produced at their (Volkswagen) facility and vice-versa."
Internationally, the VW group operates in a similar fashion in competitive markets such as Europe and North America, among others.
Experts add that as a result of cost cuts, all the three brands may pass on the benefits to the consumer, thus making their cars, ranging from a compact hatchback to a luxury sedan, substantially cheaper.
Skoda had already made an announcement of more than doubling its production capacity to 30,000 units per annum on a double shift basis from less than 15,000 units last year.
The company has the capacity to hike it beyond that before adding production lines within the complex. VW's own plant will come up in Chakan, near Pune, in 2009 having a capacity of 110,000 units per year.
Kappler hinted that the company has the option of adding production lines in Aurangabad on the spare land available, if demand surpasses supply.
Skoda forayed into the small car segment with the Fabia last week, targeted to bring sizeable volumes to the company's tally, which stood at 13,000 units in 2007.
A company official from Volkswagen, said, "Volkswagen has lined up several investments for India, which is the second most important market for us in the world after China. Considering the demand boost, we are confident of doing good business here."
The group's funds will be utilised in increasing production at Skoda's Aurangabad facility, local independent production plans for Audi and also for parts procurement to feed its international plants. Reports suggest that the group is aiming to source components worth more than $1 billion.
