Volkswagen stays positiveon growth in India

Volkswagen is being positive about its passenger car sales in India, especially with the Dasara festival having begun yesterday. Also, the German automaker is passing on benefits of the Corporate Tax cut to customers and they hope to cash in on that.

“Enquiries have picked up, but we are missing a bit on the conversions. However, we are confident of a good festive season. We see that there is movement and customer sentiment is getting better,” Steffen Knapp, Director, Volkswagen Passenger Cars India, told Deccan Herald.

With the tax cut, Volkswagen has very recently launched Corporate Editions of their cars. “We have announced Corporate Edition very recently,” Knapp said. “That is basically giving a five-year warranty, five-year roadside assistance and very strong individual offers to all vehicles in our range after the tax cut. After what the government did, we thought of giving something back as a factor to improve customer sentiment. The reception from customers has been nice. In fact, we are around seven per cent better in Polo and Vento sales as compared to last year,” he added.

India 2.0

A part of the strategy to improve functioning was the merger of three entities recently and go all out as part of the big ‘India 2.0’ plan. “The intent of the merger was to get more flexible, nimble, get faster and lift some synergies. The first one was the Skoda factory in Aurangabad, the second one was the national sales company office in Mumbai and then the Volkswagen Chakan (Pune) plant came. With these different legal entities, some processes are not fast and flexible anymore,” he said.

“By getting these as one entity, we are getting faster and closer as a team, we have aligned HR policies and a lot of other things. We can now interchange people faster within our organisation and so on. Therefore, we believe that we are faster, leaner and more focused on the Indian market,” he informed.

“We are investing 1 billion Euros (approximately Rs 8,000 crore) into the India 2.0 initiative and this is clearly focused on the domestic market. We want to get bigger in India and our vision at Volkswagen is to achieve a minimum of three per cent market share in the next five years,” he stated.

Knapp said that while things in auto parts and engineering could be planned, sales is a very different game. “In sales, there is one factor and that is the customer. The customer has emotions. Personally, I believe that the reason we are investing that much is that the long-term view of India is very positive,” he stated while adding that the Polo, Vento and Tiguan have been their best selling products and from 2017-18, there has been an increase of 40% by volume.

Bharat VI switchover

The buzz in the Indian automobile industry is currently the switch to Bharat Stage-VI from April next year, a big leap from the current BS-IV.

And Volkswagen has its strategy clear.

Asked if the company would roll out BS-VI cars in India, Knapp said: “Of course. Our decision is not to produce any BS-IV cars in 2020.”

While BS-VI is coming, the larger disruption is the talk of hybrid cars and the far-cleaner electric vehicles. However, there are hitches like the cost of cars and charging infrastructure for electric vehicles.

“Hybrids do not make a business case now because the cost is pretty high. We are focusing our efforts on petrol and TSI because there is a major shift to petrol at the moment,” Knapp remarked.

“Our global strategy with Volkswagen was to be CO2 neutral in 2015. So, the key technology we are forcing is electrification. We launched the ID.3 electric vehicle in Frankfurt and it is CO2 neutral. There will be CO2 emission in the ID.3’s production but it will not emit CO2. As far as the future is concerned, we are going to have 25 new vehicles (only Volkswagen) being launched in the next three years. By 2025, around 30 per cent of all our vehicles will be electric,” he explained.

“But in India, it is slower. Given the infrastructure and lack of a clear framework in the development of the technology, we will wait and watch. We have the technology, but now we do not see a viable business case in entering electrified cars in the country,” he added.

To put things into perspective, Germany has about 60,000 charging stations and India has only about 2,000.

Knapp feels that electrification is definitely the solution for environmental problems in India but there has to be a long-term plan. “It needs to be a holistic, thought-through plan and having a six-month policy will just not work. It should be for a frame of, say, five years. Obviously, I am also living in an environment that is dynamic. You have to make adjustments, but the idea should be the same. What we need is infrastructure and a clear plan as to how we are going to do it,” he said.