Could save 15-20% cost by localising in India: Volkswagen

German carmaker Volkswagen inaugurated Tuesday its new diesel engine assembly plant in Chakan, Pune. Built over 11 months at a cost of Rs 240 crore, the plant spans 3,450 square meters and is part of the existing factory premises.

As we continue to deeper localisation, as we localise other power trains, our objective is to get between 85 and 90 percent

Mahesh Kodumudi

President & MD

Volkswagen India

German carmaker Volkswagen inaugurated Tuesday its new diesel engine assembly plant in Chakan, Pune. Built over 11 months at a cost of Rs 240 crore, the plant spans 3,450 square meters and is part of the existing factory premises.

The plant will assemble VW's India - specific 1.5 litre diesel engine that will be used in the VW Polo, Vento and Skoda Rapid.

CNBC-TV18's Farah Bookwala Vhora caught up with Mahesh Kodumudi, President and MD, Volkswagen India and started by asking him how much localisation the new facility would help achieve.

He said the overall local content on Polo and Vento still stands around 70-72 percent. "As we continue to deeper localisation, as we localise other power trains, our objective is to get between 85 and 90 percent," he added.

On impact of cost reductions, Kodumudi said the company has to look at it on an individual business case basis, but in terms of cost savings it could achieve between 15 and 20 percent savings by localising in India.

Kodumudi further believes that exporting of engines is definitely a possibility. "As of now, we have not yet found customers for this engine outside but if we do we are glad to export it as an engine or as a fully built unit in a car but we are not offering it to other manufacturers," he added.

Meanwhile, Kodumudi said the 1.5 litre TDI was specifically engineered for the Polo, the Vento and Skoda Rapid in India and therefore, the engine on those three cars is meant only for Indian market. "However, it is a different displacement engine. We have achieved two different power levels and we are also looking at one other power level on this engine," he concluded.

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