Hot News: Maruti to Wear VW & Skoda Badge

India will be one of the first countries to see the effects of Volkswagen’s $2.5 billion investment in Suzuki for a 20 percent stake. With Maruti Suzuki cornering just under 50 percent of the market, India is clearly the most important market for Suzuki and VW sees a huge opportunity to piggyback on Maruti’s success.

Cooperation between VW and Suzuki has already begun at a high level and an organisation structure has been put in place for regular interactions between teams from Wolfsburg and Hamamatsu to jointly explore opportunities. For VW, India is a key market and the Suzuki alliance presents the German automaker with a huge range of possibilities in the small car segment.

The alliance with Suzuki coincides with VW’s decision to axe the Up!-based mini-car for India, but that would leave VW with no presence in the core segment of the Indian market below the Polo. Also, VW’s cost structure is too high for it to effectively compete in such segments that are super-sensitive to price. Yet, it’s a part of the market which no carmaker can afford to ignore.

However, Maruti’s dominance in the lower band of the market where VW is completely absent could prove to be a golden opportunity for German giant. The VW Group has identified two models from the Maruti stable that it is keen to rebadge as its own brands. According to company sources, at a meeting, Maruti, VW and Skoda India officials explored the possibility of putting a VW badge on the A-star and a Skoda badge on the WagonR.

The thinking is that the sophisticated looks, driving dynamics and overall styling of the A-star are more suited for the VW badge while the WagonR with its roominess and space, a Skoda attribute too, is better suited for the Czech brand.

VW is keen to begin the its rebadging exercise as soon as possible and in fact, wants to have the VW- badged A-star and Skoda-badged WagonR in their respective showrooms as early as 2012. To meet this deadline, we understand that only minimal changes would be done. Reskinning is not feasible.

Apart from new lights, bumpers and grilles, the rebadged cars could end up looking unmistakably like Marutis. Even the interiors would remain largely untouched as a redesigned instrument panel will take too long develop.

Talks on powertrain sharing between the two companies are on and while the logical first step is to plonk a VW diesel under a Maruti hood, especially since Suzuki doesn’t have its own diesel motors, the reality is that it’s still cheaper to use a Fiat Multi-jet (even after paying license fees to Fiat) because of the huge amount of investment that’s gone into localisation of the Multi-jet.

In fact, VW is looking at some of Suzuki’s motors and indications are that VW engineers have been greatly impressed with the K-series engine, especially the 1.2 litre. We wouldn’t be surprised if these motors ended up under the hood of a future VW or Skoda. It is not clear where these ‘Volkzukis’ will be made. Again, it would be logical for Maruti to produce them for VW and Skoda in the same way it produces the A-star as the Pixo for Nissan. However, Maruti has huge capacity constraints at present, which may not be freed up by 2012. VW has a huge plant at Chakan with capacity to fill and may consider this location to produce VW’s A00 platform cars.

Both VW and Suzuki are totally mum on the subject and are unlikely to announce any cooperation immediately. But VW is in a big hurry to expand its presence here and the alliance with Suzuki will play a key role in VW’s big ambitions on the sub-continent.

Thanks to: Autocar India