Remember, a while ago we told you that Volkswagen and Suzuki had started their synergy drive in India. That was around five months after the global auto majors had struck the $2.5 Billion global partnership. Volkswagen India and Maruti Suzuki had started visiting each other’s factories and both were collating synergy possibilities in back-end areas like product development, project implementation and manufacturing. India is indeed a crucial small car market for both the companies and now we have some development on the news.
We hear that Suzuki Motor is not willing to share its car platforms in India with Volkswagen which holds a 20 per cent stake in the Japanese car maker. Sharing is caring, but not when it means business and Maruti Suzuki does have a point. “There is no possibility of platform sharing (with Volkswagen) as the German company’s production and product development costs are very high and that could make our business unviable,” says Shinzo Nakanishi, MD and CEO of Maruti Suzuki India. The Germans and Japanese are as of now thinking of limiting their friendship to sharing of production facilities for contract manufacturing.
This decision is certainly going to sadden Europe’s largest car maker which must have had grand plans for acquiring market share in India. Right now, India is one of the most promising car markets in the world; a crucial market if VW is looking at becoming the world’s largest car maker. However, “There is a possibility of an original equipment manufacturing deal with Volkswagen, like the way we have with Nissan which sells hatchback A-Star as the Pixo in Europe,” said Mr Nakanishi.
When VW had picked up the 19.9 per cent stake in Suzuki, the two companies had said that they would explore possibilities of vehicle development and joint production. VW must have picked up the stake only because of Suzuki’s strong presence in India, and now, it looks like all dreams are shattered into pieces.
Meanwhile Volkswagen has been putting into practise Suzuki’s production techniques to control costs. The small car market has been booming now and VW has learning to generate volumes in the segment. Mr Nakanishi said the European firm can learn a lesson or two in cost-effective manufacturing from Maruti. “Volkswagen’s cost of products is high whereas Maruti’s product management costs are very low; so they can learn from us,” he said. It’s going to be harder though.
On the other hand, Maruti Suzuki has no plans of tapping Volkwagen India’s facilities to overcome its current capacity crunch. “They are too expensive,” said Mr Nakanishi. He, however, said Suzuki and Volkswagen may make some solid global announcements in the next six-to-eight months. Some project may come out by the end of this year or early next year. “It takes time as both companies are very big, so to find synergy is not easy. They are doing some discussions,” Mr Nakanishi said.
Suzuki is eager to get its hands on Volkswagen’s technology, mainly smaller diesel engines, while VW wants to gain from Maruti Suzuki’s expertise in cost-effective and efficient high-volume production. Let’s wait and see what the future holds.
