Over the next couple of years, the
Volkswagen group expects to build a range of engines to power a slew of
brands within the group. This engine plant could come up by 2014, in
Chakan, Pune, which is said to be the first choice of the VW group for
setting up the new engine plant. However, the final decision on the
location of the engine plant is yet to be taken as Volkswagen is not
happy with the Maharashtra government’s VAT policy, which continues to
be a bone of contention amongst almost all the automakers seeking to
make fresh investments in the highly industrialized Indian state.
2012 Volkswagen Polo used as an illustration
The engine plant that Volkswagen seeks to
build by the end of 2014 will supply engines to Volkswagen, Audi, Skoda
and Porsche cars. Currently, most of the high end car engine that VW
group brands use in their car ranges are fully imported as completely
built units. Full import through the completely built unit(CBU) route
means that the engines are slapped with high import duties resulting in
the final cost of the cars going up. Naturally, building engines in
India will allow the Volkswagen group to price cars more competitively.
Also, it will result in generating more jobs, mainly for the Indian
youth.
Volkswagen Polo Side Profile
The Volkswagen group seeks to become the
world’s largest car maker by 2018. In order to achieve that objective,
the German automaker has to sell more of its cars. So, the engine
manufacturing facility planned at India could be another step in this
direction as it could deliver more competitively priced cars, resulting
in higher sales. The other advantage of local manufacture of these
engines means that the cost of spare parts could go down. German cars,
in general carry the impression of being expensive to own and maintain
due to the high cost of spare parts.
Volkswagen Polo Rear
Engine assembly in India potentially
indicates some amount of localization kicking in, making the cost of
spares cheaper too. Coming back to the location of the plant, a lot
hinges on the Maharashtra government’s VAT policy, which will be crucial
for fresh investments in the state. Currently, the Maharashtra
government exempts VAT paid on vehicles manufactured and sold in
Maharashtra only. The previous VAT policy of the government refunded the
entire amount of VAT paid on vehicles manufactured in the state, but
not necessarily sold there. This change in stance has led to the
automakers being at loggerheads with the government for quite some time
now.
Courtesy: MyDigitalFC
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