International Finance Corp (IFC), the private equity arm of the World Bank, is planning to lend Euro 60 million to Volkswagen India Pvt Ltd for its upcoming plant in Pune. According to the proposal, the investment will be in the Euro 580 million integrated car manufacturing plant which will have an initial capacity of 110,000 units a year. IFC may consider an equity or quasi-equity component of this Euro 60 million. IFC is also looking to provide a syndicated loan of up to Euro 75 million.
The project will create 2,500 direct jobs and around 10,000 indirect jobs through the value chain from suppliers to distributors and dealers. Volkswagen also plans to bring in technological know-how through this project.
Reports also suggest that Volkswagen will launch “people’s car” Beetle late this year. Currently its models in India include Passat, Jetta and Touareg. Another one of its companies, luxury car maker Audi, is also expanding its India operations.
Germany-based Volkswagen is one of the largest automobile manufacturers in the world. The India unit was formed in 2007. The unit in Pune is coming at a time when automobile manufacturers across the world are grappling with excess capacity and shutting down plants. In India, the sales of passenger cars jumped up by 22% in the month of February though the sales of commercial vehicles continued to decline. This was the first rise in sales since September 2008.