Engine components manufacturer, Continental Engines Ltd has announced a licence agreement with Italy-based V.M Motori (VMM), a DaimlerChrysler Group subsidiary, to produce engines in India.

The technical license agreement entails know how for a modular one-cylinder and a two-cylinder engine. VMM will provide all the assistance required in the manufacture of the engines to exact specifications. Continental Engines will pay a license fee in stages and royalty per engine for five years from the date of commencement of production.

The company is investing about $1million to building an assembly plant for the new engine adjacent to its existent facility in Bhiwadi, about 100 km from New Delhi in the state of Rajasthan. The plant will begin with an initial capacity of 15,000 units per month for use in two- and three-wheeler or generator sets, said Continental Engines CEO, Mr Alok Dutta.

This is a major move for Continental Engines, from manufacturing engine parts to full engines. The company was scouting for a partner to source small engine technology until it finally struck the deal with VMM. Going forward, the partners would look deeper into the deal and explore the possibilities of adding more models from the VMM range for manufacture in India.

Continental Engines reported sales of $27.8 million in 2004, with exports contributing to 80% of sales.

Deepesh Rathore / Tilak Swarup