VW invites 10 German suppliers to Pune

The company relies heavily on some of its original suppliers for spare part procurement for their sustained efficiency. More than 10 global auto parts makers have expressed keen interest in Volkswagen car and utility vehicle making project based in Chakan, near Pune. Most of these companies supply to Volkswagen internationally.

"We are in the final process of selecting component manufacturing companies, which will supply auto components to our plant. We have issued over 10 tenders to various companies so far. The response has been great from them. We will finalise the plan in the next few weeks," said Thomas Dahlem, director, manufacturing engineering, Volkswagen India.

The facilities of all such companies will be situated in Volkswagen's land spread over 240 hectares. This will help the German company in negating any time lapse in the delivery of components and also save costs on transportation.

Of the total area of 230 hectares, only about three-fifth or 140 hectares is currently being utiltised by Volkswagen alone. The company intends to allot plots within its complex to facilitate shops for the component suppliers.

The firm was in the process of inviting companies to India for making spare parts as its own original target of setting up manufacturing centre by 2010 was advanced by almost a year to the first half of 2009.

"Indian market is very demanding and that's why we have changed the time frame," Dahlem said.

The official refused to divulge details about the names of the auto component makers that have shown interest in the VW's project as well as their projected investment. Depending on its capacity, a component making company incurs costs anywhere between Rs 30 crore to Rs 200 crore for a facility.

Apart from the regular VW models, such as the recently launched luxury sedan Passat and yet to be launched models like mid-sized Jetta, sports utility vehicle Touareg, small cars Polo/Golf and UP, the facility will also produce cars for the companies, including Skoda and Audi.

Currently, Skoda has its own independent plant in Aurangabad where it makes models like Laura, Fabia, Octavia. Audi's A6 as well as VW's Passat model are produced there.

In June last year, the company conducted its first ever suppliers' conference in India, where about 250 suppliers from India and abroad participated. The company was keen on inducting suppliers, thus overseeing a long-term partnership for domestic consumption as well as sourcing.

The fresh foray of more number component companies will either come in the form of direct investment into the country or through the formation of a subsidiary company, thereby availing the benefit of 100 per cent foreign direct investment (FDI) allowed in the segment.

Investments are also likely to happen through formation of joint ventures with Indian companies, which have expertise in making similar components.

Recently, a number international auto component making companies have made a foray into the market through joint ventures. These include Magneti Marelli, Delphi, FTE Automotive and Magna International, among others.