The Indian arm of Volkswagen Group – the world’s largest carmaker — is also open to partnerships in the country and will continue to talk to interested parties in future, its India chief told ET, a move that will help build scale and reduce break-even points.
The carmaker is bullish on the future of the Indian market, including its exports potential, and will roll out sedans and sport utility vehicles between 2021 and 2022, said Gurpratap Boparai, managing director of Skoda Auto Volkswagen India.
Boparai said the company expects to operate the plant at 100% capacity within two years and the group garnering 3% share of the Indian market.
“We will be in the phase of ramping up production from next year. One by one, new models will be launched every six months till 2022 under the India 2.0 plan. The next year will be definitely better than this year, but we will really see our full volumes in 2022. That’s when we expect our group market share to be around 3%,” he added.
With capacity likely to be fully utilised next year, Skoda VW will explore its next phase of expansion in the country, Boparai said, but when and how soon will depend on market recovery.
“If we do a partnership, we would clearly be expanding capacity and then that capacity can be shared. There is nothing concrete at the moment (on partnership). We continue to engage with all players that have similar strategies,” he added.
The company has reportedly been in talks with MG Motor India for a contract manufacturing tie-up.
Boparai, however, declined to comment on potential partners it is in discussions with.
For years, 60-70% of Skoda VW’s total production was reserved for exports, but Boparai said that is set to reverse from 2021.
“We are very bullish about recovery in the Indian market, so we will continue to produce as much as the Indian market absorbs and then whatever is required to completely utilise our production capacity that we will export. The recovery in the exports market is rather slow, as against a V-shaped recovery we have seen here,” he said.
VW Group has so far exported half a million cars from India, the company said on Tuesday.
While the domestic market will take precedence over exports, the group is likely to start exporting Skoda-badged vehicles starting next year, expanding its global footprint for India-made cars to over 100 markets.
Backing the government’s Make in India push, Boparai said the country can gain a competitive edge on bigger car exports too by removing the sub-4 metre definition.
India is one of the most cost-efficient production bases for automobile companies, but the tax structure prefers cars less than 4 metres in length and that is taking away its competitive edge, Boparai said.
“The global market of sub-4-metre cars is roughly 7% of the pie. And that is obviously not too big,” he said.
“We understand that it will take time to transition to any new taxation regime, but there has to be some roadmap on when the cess on the two categories of cars will come down to the same number. That would really open up our industry to the segments where there is far more export potential globally,” Boparai said.