The German auto giant, Volkswagen is aiming to increase its volume of component exports from India in the coming years for its global operations. The company has a target of tripling its annual component sourcing from the country to over 300 million euros (Rs. 2074 crores) in a period of 3 to 5 years. To achieve this aggressive target, the company is aiming to broaden its supplier base by over 200 to increase the variety of components and spare parts to cater to the demands of the global market. The company is able to gain a cost advantage in its global models by sourcing the components from India and thus increase its profit share. It will also help the company is increasing its capability of localizing components that will be of help when the company will launch its small car, the UP! in the Indian market 2 to 3 years down the line.
“We are still seeing India as a very competitive sourcing base – there’s a cost advantage of at least 10-15% over Western Europe. And having worked with Indian vendors over the past few years, their capabilities too have matured and we do see them playing a bigger role.” Mahesh Kodumudi, Executive Director (Components Purchasing), Volkswagen Group India, said.
Increasing the localization content will help the company to price the UP! very aggressively to be able to compete with its rivals like Maruti Suzuki, Hyundai and General Motors. Currently the company sources components like engine and transmission parts, metallic components, sheet metal parts and many plastic parts from India. Annually the company will be close to sourcing about Rs. 432 crores of plastic parts annually. Volkswagen will be investing close to 250 million (Rs. 1728 crores) over the next few years on tooling and vendor development. The company has already invested a similar amount of money for such purposes since its entry into the Indian market. Overall, the company has plans to source components worth close to 1 billion for domestic and export markets.
