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Volkswagen India starts diesel engine assembly plant at Chakan

Volkswagen Group India on Tuesday launched its first engine plant in the country which will assemble 1.5-litre diesel engines for two VW models as well as for the group arm Skoda's Rapid sedan.

Pune: Volkswagen Group India on Tuesday launched its first engine plant in the country which will assemble 1.5-litre diesel engines for two VW models as well as for the group arm Skoda's Rapid sedan.

The Rs 240-crore powertrain plant at its Chakan facility near here is spread over 3,500 sqmt and can produce 98,000 engines per annum in three shifts, all Bharat Stage III compliant.

The company will use the new power trains from the new facility for the models Polo, Vento and Rapid.

The plant was inaugurated by the Maharashtra Chief Minister Devendra Fadnavis today.

Fadnavis asked the company to make Maharashtra its global export hub and assured that his government will further reduce the existing 25 levels of approval needed to start a business.

The labour laws in the state were "anti-labour and anti-industry and only time killing", the Chief Minister said, adding that they would be revamped soon.

While the five Volkswagen group companies -- VW, Audi, Skoda, Porche and Lamborghini -- together sell 25 models in the country, Audi being the largest in terms of volume and offerings and the market leader in the luxe car space, VW has been trailing with only three models -- Vento and Jetta sedans and the Polo hatchback.

The company has not launched a model in India for a long time. While the VW group's Polish subsidiary Skoda had a good start initially, it has been been on downhill now.

Asked about a possible revival of Skoda India, VW Group India president and managing director Mahesh Kodumudi said he would not talk about Skoda today.

"The 1.5-litre TDI engine has been specially developed for the needs of this market and is now being assembled locally. With this step, we take an important step towards achieving our long term goal of increasing local content," he said while launching the plant.

He did not specify the prices of the engines. He also ruled out price cuts on these three models, saying the latest batches have been priced keeping in mind the local roll-out of the engines. So far, the company has been sourcing its 1.5-litre power trains from its Polish plant.

Kodumudi also said the company is looking at having a petrol engine facility in the country, but no decision has been taken so far.

In 2014, the company shipped out a little over 64,000 units to 32 countries in Asia, Africa, and to Mexico in North America. Kodumudi said this year it hopes to maintain the level.

The Pune unit also exported components to Malaysia for 5,000 cars. So far, the VW Pune facility has rolled out 4.5 lakh cars in the domestic market.

Last year domestic sales and exports were in equal proportion, he said.

Asked about the growth target, he refused to put a number saying he doesn't expect this year to be much better than the last year, but the company expects to maintain the market leadership.

Its German rival Mercedes-Benz, it can be recalled, caught up with Audi last year by selling over 10,201 units, becoming second largest luxe car maker in the country after Audi.

Kodumudi said out of the 166 parts the new power train has, 29 are locally sourced and in the second phase the local content will go up. He also said that last year alone its OEM vendors exported components worth Rs 1,200 crore.

Kodumudi said the VW Group so far has invested 710 million euros in the country, all of it in Maharashtra, and the new powertrains are not meant for exports to group plants as they are specifically made for the domestic market.

The 240-crore engine facility also includes a full-fledged engine testing facility for the VW group, and took 11 months to complete and was set up with of experts from the group's engine plants in Salzgitter, Germany and Polkowice, Poland.

The facility will create over 260 direct jobs, he said, adding the plant will produce for two power levels -- 90 ps and 105 ps peak power.

Currently, the Pune plant manufactures Vento and Polo and Skoda Rapid. The VW group sells 25 models in the country.

The Pune plant has a manufacturing capacity of 130,000 cars per year and is currently manufacturing the Polo and Vento and Skoda Rapid, while the Aurangabad plant caters to various premium and luxury models of Audi, Skoda and Volkswagen with an annual capacity of 89,000 units.