The final decision about using a common powertrain plant for Volkswagen, Skoda and Audi brands of VW Group in India will be taken by the end of 2012. It is expected that this proposed factory, when approved, will start operating by 2014 end. According to senior officials, the Chakan plant of the Group will be the location for this common facility in all probability.
This move will translate into reduction in costs and increased sales volumes, as it will enable the trio to compete more aggressively with established brands like Maruti Suzuki and Hyundai. In order to adopt an aggressive stance in a mass market, it is important for the manufacturer to save costs.
President and Managing Director (MD), Volkswagen Group India, Dr. John Chacko, said, “This is one of the projects we are working on, and logistically speaking, it will be at Chakan. We need two years before it starts operations. A decision will be made by end of the year.” Likewise, Head, Audi India, Michael Perschke, said, “We will assemble engines at a group level. It will likely happen at Chakan, but no clear decision on the location has been decided yet.” The Chakan plant of VW Group manufactures volme-pulling models like Volkswagen Polo and Vento, Skoda Fabia and Rapid.
However, there are certain challenges that the auto major would have to overcome in order to make this move a reality. Volkswagen Group needs to assemble nearly 1,000 units every day to achieve the right volume to make the powertrain plant a viable option. Besides this, the Group is also dependent on the decision of Maharashtra government regarding the VAT refund issue. Dr. Chacko said, “Big investments plans are on hold right now, as we await a response from the State Government.”
At present, VW Group operates on a small scale to assemble powertrains at its Aurangabad plant. This facility also manufactures the premium Volkswagen and Skoda models and Audi's luxury cars. The majority of petrol and diesel powertrains are currently sourced from the Group's factories in South Africa, Czech Republic and Germany. These engines attract an import duty of nearly 7.5 per cent on a Completely Built Unit (CBU). The lead time for production and shipping has to be ensured by the Group by ordering the engines beforehand, which reduces the flexibility in manufacturing procedure.
