The world?s third largest car manufacturer Volkswagen may look at introducing cars in the sub-Rs 4 lakh segment in India, taking advantage of Maruti?s expertise in the category. The prospects of such a development follows Volkswagen buying 19.9% stake in Maruti?s Japanese parent Suzuki for about $2.5 billion to enhance its presence in small car segment in Asia.
The sub-Rs 4 lakh segment, which has so far been unviable for Volkswagen, may turn lucrative for the company post its synergy with Suzuki. The development comes at a time when the demand for small cars is increasing both in emerging markets like India and advanced markets like Europe.
Executives at Volkswagen have publicly said over the past half year that Suzuki would be an interesting target given its expertise in small cars ? a key segment to compete in emerging markets.
?Volkswagen may look at segments below Polo and Up, the cars which are set to be launched in India in 2010. Volkswagen?s current models Passat and Jetta are not doing that well in India in the wake of competition from car makers like Skoda (Volkswagen?s own brand), Toyota and Honda. It suits Volkswagen to look into segments that are viable and popular in India and the European car maker has very little expertise in that,? an industry observer said. Analysts see many possibilities emerging out of the deal in the Indian market. Maruti will get access to Volkswagen?s diesel technology, which at present is the Indian auto major?s weakness. ?Apart from access to diesel technology, Maruti will get more access to European market where the market is moving increasingly to cheap and energy effient cars as reducing carbon emissions is the tall order of the day,? said Abdul Majid, senior auto anlyst with PwC.
Further, Volkswagen would benefit from Maruti?s huge distribution and sales network in India.
When contacted, R C Bhargava, chairman, Maruti Suzuki India said, ?As of now, nothing can be said as to how the synergy between Volkswagen and Suzuki will shape up in India. Many possibilities will open up but today nobody can say what will happen. We need to wait and see.? Bhargava said that at the moment, the two sides have just entered into the deal and one needs to wait how the details are finalised.
The Suzuki-Volkswagen deal saw the shares of Maruti Suzuki close up 2.54% at Rs 1,608.95 on the Bombay Stock Exchange.
?Both parties are focused on achieving synergies in areas of rapidly growing emerging markets as well as in the development and manufacturing of innovative and environmentally friendly compact cars,? Volkswagen chief executive Martin Winterkorn said in a statement on Wednesday. Suzuki, which dominates the Indian market as well as the unique Japanese segment for 660cc mini vehicles, has a market capitalisation of $13.7 billion, against Volkswagen?s $45.7 billion.