Maruti may soon handle Volkswagen production

The final blueprint of the multi-crore global tie-up between Volkswagen and Suzuki Motor Corporation has started to unfold, with Maruti Suzuki looking at becoming an original equipment maker (OEM) in cars for the German automaker for markets outside India.

Maruti Suzuki may forge a manufacturing deal with Volkswagen and the deal could be on the lines of its tie-up with Nissan, Japan’s fourth-largest carmaker.

“Talks are on with Volkswagen. Collaboration can happen in production and product planning between the two companies. The possibility is that we will act as the original equipment maker (OEM) to Volkswagen,” said Shinzo Nakanishi, managing director and chief executive officer of India’s largest passenger vehicle manufacturer. He was speaking to reporters at the launch of an upgraded version of its best-selling Alto hatchback.

Maruti Suzuki makes the Pixo hatchback, essentially the A-star, for Nissan. The company makes nearly 35,000 units of the small car every year for Nissan and the vehicle is sold as an entry-level car in Europe.

Volkswagen had picked up nearly 20 per cent in Suzuki Motor last year for $2.5 billion to gain small car technology and explore different markets.

Although finer details of the plan between the two companies are not known, Maruti sources said since Suzuki had extensive expertise in building small cars in Indian and Japanese markets, products for Volkswagen would be built for the same category.

“There are several existing products with Suzuki, as well as product programmes from Volkswagen, which can be explored for this purpose. There are several opportunities which can be properly explored,” said a Maruti executive.

Due to rising fuel costs and stricter emission norms, small cars are in good traction in Europe. While India and Japan remain as large production bases for Suzuki, the company has achieved tremendous cost efficiencies in India due to its large- scale presence.

Sources said Volkswagen was sourcing technological help of Suzuki to fine-tune its compact car Up!, a concept car it had showcased three years ago. The cost of manufacturing this five-seater small car is way beyond the car models it has to compete with.

Maruti Suzuki is working towards increasing its installed capacity by 50 per cent to 1.5 million units over the next five years. For this, the company will double its Manesar plant’s production capacity of to 600,000 units a year. The company achieved the manufacturing target of one million units last financial year.