VW to invest $530 million in new auto plant in Pune

28 November 2006

Europe's largest carmaker, Volkswagen, plans to invest $530 million in a new automobile plant near Pune. Hans Dieter Poetsch, the company's CFO, will sign an MoU to this effect with the government of Maharashtra on Wednesday, 29 November, 2006, where Maharashtra chief minister Vilasrao Deshmukh is expected to be present.

The German auto giant plans to start manufacturing compact cars at the new plant from 2009. It will employ about 2,500 people. Asian manufacturers dominate India's small-car market, notably Suzuki of Japan and Hyundai of Korea. Honda and Toyota are also planning to set up small-car units in the country.

Tata Motors also has a major share in the segment. But European companies are now eyeing this booming sector. French automaker Renault recently announced a tie-up with Mahindra & Mahindra. American major General Motors had announced its plans last week to locate its second plant near Pune to manufacture its small car, the Spark.

India has emerged as the second biggest compact car producer in the world after Japan, overtaking even Europe. During the April-November period, compact car sales in India shot up by 23 per cent, crossing the half a million mark for the first time. It added up to 520,000 units, and if exports are included, it tops 600,000.

According to the Society of Indian Automobile Manufacturers (SIAM), India's automobile market is expected to triple to 3 million units by 2015. It is likely to double to 2 million cars by 2010. Auto sales in India are growing at a fast clip of 25 per cent annually, on the back of a healthy, 8-plus per cent GDP growth.

For Volkswagen, it has been a case of missed opportunities in India all these years. VW was initially selected by the Indian government as a partner for its Maruti Udyog venture, but the German producer backed off, considering the then insignificant size of the auto industry in India. Japan's Suzuki was the next choice, and the company has not looked back.