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Volkswagen's Skoda Invests EUR 1B in INDIA 2.0 Campaign

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Volkswagen AG (VLKAY - Free Report) has announced an investment of €1 billion between 2019 and 2021 for the implementation of its planned model campaign, INDIA 2.0, for the Indian market. The campaign will be led by Volkswagen’s Skoda Auto brand. Further, a project center for vehicle development will also be set up in the country to maintain proximity to the market and understand the requirement of targeted customers.

Within a few years, India has the potential to become the third-largest automotive market, globally. In order to tap the projected increase in demand, the company has been looking for sustainable growth in the country. Per Skoda’s CEO, the company is aiming for a market share of up to 5% in the long term, which will also depend on market and segmental development.

Skoda will manufacture new products in India through its heavily-localized MQB A0 platform. The platform is already in sync with stricter emission and safety standards that are expected to be applicable in India by 2020.

Volkswagen AG Price and Consensus

In the beginning, the sub-compact MQB A0 platform will focus on the Indian market. In the second phase, the brand will look for possibilities to export vehicles that are manufactured in the country. Based on this platform, Skoda and Volkswagen have plans to develop numerous products. The model campaign will initiate in 2020, with the introduction of a sports utility vehicle (SUV).

Per Reuters, the effort led by Skoda is in sync with Volkswagen’s policy of decentralization to better manage different global regions by its different brands. In 2017, the demand for Skoda’s vehicles rose around 30% in India, primarily due to increased demand for Skoda Rapid cars and Kodiaq SUVs.

Price Performance

In the past three months, Volkswagen’s stock has moved down 19.8%, underperforming 7.4% decline of the industry it belongs to.

Zacks Rank & Stocks to Consider

Currently, Volkswagen has a Zacks Rank #4 (Sell). A few better-ranked stocks in the auto space are Magna International Inc. (MGA - Free Report) , American Axle & Manufacturing Holdings, Inc. (AXL - Free Report) and Visteon Corporation (VC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Magna has an expected long-term growth rate of 8.5%. Shares of the company have risen 24.8% over the past year.

American Axle has an expected long-term growth rate of 8.1%. Shares of the company have risen 3.1% over the past year.

Visteon has an expected long-term growth rate of 15%. Shares of the company have risen 20.8% over the past year.

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