Dieselgate, cash crunch may hit VolksWagen Ameo launch in India

The launch timeframe for the Ameo compact sedan could be affected by the ongoing crisis.Marred by the USD 10-billion (estimated) expenditure for repairing or buying back the Dieselgate cars in the US, VW has been undertaking several measures to cut costs on a global level. This includes cutting production and reducing the number of shifts at various plants including the ones in Brazil, Russia, Argentina, and Mexico. These administrative decisions are aimed at improving the profitability and they usually result in significant job losses.

Economic Times reports that VW India is also facing the heat. The top management reportedly circulated a letter to its employees which warned them of potential job losses if the targets are not met. The company’s lackluster show in the domestic market is currently being offset by significant growth in export operations. VW India exports around 50,000 units of the Polo and Vento per year to Mexico alone but the going is expected to get tough in the coming months because all the VW plants will be pitted against each other and only the ones which meet the target would come out unscathed.

It’s to be noted that VW India recently added third shift to its Chakan plant and hired 800 employees to cater to the growing exports. The company surpassed the 500 units per day critical production limit on March 26 (as per ET report). In the coming months, it would be forced to compete with VW plants from other countries to retain its export volumes.

It’s not just about potential loss of jobs. The ongoing cash crunch would also have a negative impact on VW India’s future investments and new model introductions. The internal letter also suggests that the introduction of the Ameo by mid-2016 may not go as planned.

This article has first appeared in Rushlane.com