Top officials of the country's largest carmaker Maruti Suzuki and Volkswagen India are understood to have met today to explore synergies in production and vehicle design.
After German auto major Volkswagen (VW) picked up a 19.6 per cent stake in Suzuki Motor Corp (SMC) last year for $2.5 billion, there has been speculation that they may look for synergies in India, the world's second fastest growing car market after China.
"The most strong possibility of this global tie-up between Suzuki and VW may lead to synergy in production areas, where VW may leverage Maruti Suzuki's expertise in high volume production at a very competitive cost and efficiency," a source said.
According to sources, the two companies are exploring synergies in areas such as product design -- not necessarily sharing models or joint model development -- and product testing, evaluation or part designing of future models and special projects.
The sources, however, ruled out any possibility of sharing distribution networks between the two firms as "a major point that clearly emerged out of this discussion indicated that in the area of retailing, Maruti Suzuki will be a competitor to VW."
It is believed that the top management of Maruti Suzuki India (MSI), including the heads of production, marketing, supply chain and service, were at the meeting, while the VW India team was led by its President, Joerg Mueller.
When contacted, a spokesperson of MSI said: "This issue is being handled by SMC, Japan. We have no comment to offer on this please."
Comments could not be obtained from VW India officials.
A new entrant in India, VW is yet to gain any firm ground. It started production in India from this year at its Chakan plant, where it invested around Rs 3,500 crore, having a capacity to produce 1,10,000 cars a year.
In contrast, MSI is the largest auto brand in India, commanding over 55 per cent of the car market, and is inching towards sales of 2 million units annually. MSI is also ramping up its research and development division with over 1,000 engineers and investing around Rs 1,500 crore in an upcoming R&D centre at Rohtak, to be used for developing cars for India and the ASEAN region. This would be the largest R&D centre of SMC outside Japan.