Volkswagen AG, which recently announced it would move to invest $250 million over the next few years in India, aims to increase its use of locally made car parts to survive a highly competitive market.
Volkswagen is the market leader in China, the world’s largest auto market, but after five years since it entered another emerging market in the region – India – it has secured just 2.1% of it.
“Indianisation is certainly a key word we learned about,” said Michael Mayer, the chief of the local Volkswagen India Pvt Ltd. “We need to make the cars more adapted to the taste of the Indian customers.”
In India, fierce competition from more affordable brands like Hyundai and Maruti Suzuki or even the likes of Toyota, as well as the lack of an expanded affordable model line-up has seriously hindered Volkswagen. It now faces an additional hurdle from India’s economic situation that has made the automotive industry decline in the last two years.
The VW executive said that the company’s strategy now hinges on the localization level, considering the market still has a huge potential. The carmaker wants to raise local sourcing of car parts from the current level of 65-70% to 90% in the near future by locally assembling engines and gearboxes.