By on August 5, 2010

Running a multi-national car company the size of, say, General Motors, Ford or Toyota means having lean, efficient operations. In the SUV/light trucks segment, turning a profit is easy. Because of the inherent profitability of these products, your operations don’t need to be that efficient to turn a decent profit. Where you really need to concentrate on profits is the other end of the scale. The small car market. This is where raiding the parts bin, nicking a platform from another division and moving production to a low cost country are taken as read when producing a plan for your next small car. But what if you’re trying to break into a market where small cars need to be firmly in the “four figures” price bracket? Well, this is the problem that Volkswagen is having in India. Like China, every car maker wants a piece of this Asian Tiger Elephant, but Volkswagen just simply doesn’t have the presence there to make their cars profitably. Or do they?

DNAIndia reports that Volkswagen and Suzuki may have found a solution on how to both expand in India. Maruti Suzuki says that contract manufacturing is possible with Volkswagen India. The MD of Maruti Suzuki, Shinzo Nakanishi, said “…there is a possibility of an original equipment manufacturing deal with VW, like the way with have with Nissan…Maybe.” What a tease! Especially if you know a little about Asian ambivalence. In short, Suzuki may manufacture cars like the Polo or Jetta for Volkswagen using their existing infrastructure. Much like Nissan buying Suzuki Altos, which are manufactured in India, and re-selling them as a “Nissan Pixo“. The idea would make a hell of a lot of sense. Volkswagen, by simply leveraging an investment which they own, wouldn’t need to spend any more money to invest in India, Suzuki would increase their production volume, which, in turn, would make their cars more profitable and further cement their reputation as “India’s number one car maker”. And goodness knows Maruti Suzuki needs profits; in fact, they need some good news as soon as possible.

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4 Comments on “VW’s Indian Division Outsourced To Suzuki?...”

  • avatar

    But VW has just opened up a huge factory in India to produce the Polo and Vento (extended platform of the Polo with a trunk)there. I think they are targeting around 150K/yr during the initial phase. They will probably also rationalize production with Skoda who are also in India.

    Until Suzuki and VW start sharing components, I don’t see much happening. A good start would be for VW to share its diesel engines with Suzuki. Likewise, VW could utilize Suzuki’s small gasoline engines. The base version of the Polo has a 1.2L 3 cylinder engine, which is relatively unrefined and probably costlier than Suzuki’s new generation 1.2L 4 cylinder engines.

  • avatar

    Automotive News reports that the contract manufacturing would be for export, not for Indian domestic market.

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