Volkswagen's move to pick up a stake in Suzuki Motor Corporation could have some "interesting implications" for India, say auto sector sources.
According to media reports, the German carmaker could seal the deal by the end of this calendar year, going by what a Suzuki executive said on the sidelines of the Frankfurt Auto Show.
"For Suzuki and VW, this connection would be a win-win situation. Suzuki would have access to a variety of VW's technology, while VW would have a solid supporting leg in India and South-East Asia," he was quoted saying.
Globally, VW is poised to take over from Toyota as the world's largest carmaker. It has had a good run in China, though India is a different ballgame, given the dominance of small cars. It is here that the Suzuki alliance will help, sources say.
Happy hunting ground
From the Japanese automaker's point of view, though, India is a happy hunting ground where its arm, Maruti, has been the undisputed market leader for over two decades. In contrast, VW has been a late entrant, having missed the heady investment phase of the 1990s, and is just getting ready to launch its Polo from a plant near Pune next year.
To that extent, the Suzuki association will be critical to VW though this may not take the form of a common platform overnight, churning out cars sporting each company's badge. "VW will benefit from Maruti's low-cost base and can look to sourcing critical parts at competitive prices," an automotive executive said.
"In turn, the German company can offer its vast diesel engine range, which will be of immense help to Suzuki not only in India but also parts of Eastern Europe, China and even Japan," he added. For the moment, the company uses the Fiat 1.3 Multijet diesel after years of confining itself to petrol which allowed rivals in India to make the most of the situation.
"Diesel is the fuel of the future while its demand in India is still propelled by the fact that it is cheaper than petrol. Either way, Suzuki stands to gain from the VW association because it will pay less for using diesel engine technology," the executive said.
Maruti is the last word in compact cars and this is a segment that VW is also eyeing aggressively, though at a premium price point. Interestingly, it is sharing a platform with subsidiary Skoda with plans afoot to create another platform for sub-Rs 4 lakh cars.
