Volkswagen to make India low-cost export hub

Volkswagen AG will make India a low-cost manufacturing hub catering to select export markets as Europe’s largest car maker tries to emulate the success of global rivals Hyundai Motors and Suzuki Motor Corp. Volkswagen will export from the second quarter of next fiscal fully-built models and completely knocked-down kits of its hatchback, Polo, to South East Asia, Middle East and Africa from its Pune plant, a senior executive said.

The company will launch Polo this month-end in India. The India-made vehicle at Rs 4.5-6 lakh comes at half the European price as the company has been able to ram down costs by sourcing 80% of auto parts from the domestic market. It will help the Polo compete against Hyundai’s i20, which too is exported in large numbers to these markets.

"We are looking at all potential markets for export," said the executive who asked not to be named, adding that many markets in South East Asia and Africa would prefer the India-made Polo for its competitive pricing.

Car exports grew 30% to 3.3 lakh units between April and December last year from a year ago. Hyundai, which shipped 2.15 lakh cars, and Maruti with 1.05 lakh cars were the biggest contributors. Volkswagen, which has set a production target of 50,000 for Polo in 2010, is looking to sell up to 35,000 units in the domestic market and export the rest. The company would ramp up production next year after it launches the sedan version of the Polo, which too is to be exported.

The company’s new plant at Chakan near Pune can manufacture 1.1 lakh cars, including the Polo, other small car models and Skoda Fabia.