A Volkswagen Polo GT

German auto giant Volkswagen is considering assembling certain engines in India, with key components produced in the country, as it aims to achieve up to 90 per cent localisation within a few years.

"Our current level of localisation is 70 per cent and our aim is to take this up to 85-90 per cent in the next few years. To achieve levels of 90 per cent local content, we definitely have to localise engines and gearboxes," Volkswagen India president and managing director Mahesh Kodumudi told PTI.

To start with, the group is considering the assembly of certain engines with certain key components localised in India, Mr Kodumudi said.

"We are close to a decision and we will announce as soon as we make this decision."

The localisation programme is part of the company's planned 100-million-euro (Rs 800 crore at 1 euro = 80 rupees) investments for India to expand business, including launching of sedan and SUV in the compact segment and a hatchback.

"Localisation is one of the prime targets for us during our current consolidation phase as it helps us in reducing our costs and improving cost competitiveness," Mr Kodumudi said.

Reiterating the group's long-term commitment to the Indian market, he said, "After a strong foundation phase, Volkswagen is now in a consolidation phase since last year. With the five brands under Volkswagen Group India, we are preparing ourselves for the next growth phase which is expected to start within two years."

In the meantime, the company is also working on improving productivity, optimising cost structure and upgrading of sales and after sales network, he added.

When asked about the company's plans to ramp up production capacity at its Chakan plant, Mr Kodumudi said, "Considering that we can go up to 2 lakh cars on the existing setup, which is almost double of existing production, the domestic market will have to grow further."

The Chakan plant's current capacity stands at 1.3 lakh units in the existing two-shift system and with a three-shift system, the company can achieve 1.5 lakh cars every year, he added.

"With some minor upgrades, we can go up to 2 lakh units in the existing setup."

He also said the company produced 1 lakh cars in 2013 based on the demand from the domestic and export market.

Similarly, the company has capacity of over 89,000 units in its Aurangabad plant and it has enough scope to attain full capacity functioning before going for further expansion, he said.

The Wolfsburg-based group, which is present in India through a wholly-owned subsidiary, has five brands - Audi, Volkswagen, Skoda, Porsche and Lamborghini - in the Indian market.

Volkswagen Group India employs about 5,000 employees in the country.