Volkswagen’s engine assembly plant in Chakan goes on stream

At full capacity, the facility can assemble over 98,000 engines annually

Mahesh Kodumudi, President and Managing Director Volkswagen India stand at the inauguration of Volkswagen engine assembly plant at Chakan near Pune on Tuesday. Photo: Vivek Bendre

German carmaker Volkswagen, in a move to increase the local content in its cars, on Tuesday, inaugurated its first engine assembly plant in Chakan, adjacent to its car manufacturing facility.

The plan was set up at an investment of 30 million euro (Rs 240 crore). It was inaugurated by Maharashtra Chief Minister Devendra Fadnavis.

The plant includes a full-fledged engine-testing facility, and will make the India-specific 1.5-litre diesel engine. The plant will produce two power levels of engines of 90 PS and 105 PS.

The locally-assembled engines will be used in the Polo, Vento and Skoda Rapid models, and will be supplied for the domestic market initially.

Speaking at the inauguration, Volkswagen India Pvt. Ltd. President and Managing Director Mahesh Kodumudi said, “The assembly plant is the next major step in our commitment to India, and paves the way for increased investments and new products.’’

At full capacity, the facility can assemble over 98,000 engines annually on a three-shift system. Over 260 direct jobs will be created at the production locations of Indian suppliers, who will supply key parts and components for this engine.

This investment by Volkswagen India at Chakan takes its total investment to almost 710 million euro (around Rs.5,700 crore).

The Chakan manufacturing facility with about 3,200 employees has been in operation since March, 2009, and has rolled out over 4.50 lakh cars for India and 32 export markets in Asia, Africa and North America. In 2014, the Chakan unit exported 65,000 cars.

Mr. Kodumudi said at present 70 per cent of the total materials going into the cars at Chakan were localised. However, on the extent of engine localisation, he said around 29 of the 166 engine components had been localised in the first phase. “At the end of the second phase at end-2015, we will go up to 50 high-value parts. Beyond that, localisation would require higher sales volumes to justify the investment,’’ he said.

There were no plans for gearbox localisation as these are imported from Germany, where it is competitively priced owing to the huge scale, he said, although the company was investigating the opportunity to make petrol engines in India.

In 2015, Mr. Kodumudi said the company was not looking at any major growth. “We want to hold our position in the domestic market, and will look from growth when the new models come in.’’