Volkswagen’s present strategy and how they r doing in current Indian market The Indian arm of the biggest European car maker will focus more on strengthening its sales and service network and less on expanding market share at least until 2015. Sales have slipped 20% in the six months starting April, after growing 52% in the last fiscal Sales at the car maker, which sells automobiles including the Passat,Jetta, Vento and Polo in India, have slipped this year after growing 52% in the last fiscal. In the six months starting April, Volkswagen sales declined 20% to 30,476 units, according to the Society of Indian Automobile Manufacturers. Volkswagen India to focus on strengthening sales
In the same period, Volkswagen’s market share declined to 2.38% from 3% at the end of the last fiscal. Between April and September, the passenger vehicle industry overall grew 7% to some 1.28 million units Analysts attribute at least part of Volkswagen’s sales decline to the success of stronger models from rivals, including Maruti Suzuki India Ltd’s Swift, Dzire and Ertiga, and Hyundai Motor India Ltd’s newFluidic Verna. While Volkswagen has succeeded in establishing its brand in the India market since its entry in 2008, it has not worked on back-end systems to service large volumes, said Saxena. That’ll be its focus in the next two to three years, he said.
After that, the company will focus on selling more, he said. “So, if you ask me, in the next two-three years, we would like to grow at market rates and we would like to work around a 3% market share,” Saxena added. After its entry into India, Volkswagen’s Polo, along with Ford India Pvt. Ltd’s Figo and General Motors India Pvt. Ltd’s Beat, managed to dent the market share of companies such as Maruti and Tata Motors Ltd, but their sales slowed because of sales- and service-related issues, strong competition, and India’s slowing economic growth.
Currently, Volkswagen has about 111 dealers and it wants to add another 24 by the end of 2013.The company’s objective is to make its network customer-centric. “The focus is on increasing that percentage of customers who buy our cars (and not just the footfalls in showrooms). So, ability to convert (footfalls into sales) and ability to make customers happy about your brand and service are most important and these could possibly be done now when volumes are reasonable.” An expert with a consulting firm said one reason for Volkswagen’s slowing sales in India was the greater focus of its headquarters on the China market.
“At Volkswagen, you don’t have a single volume product. Polo and Vento are niche products, which are positioned against stronger competition. It seems, for its headquarters, the focus continues to be on China,” the expert said, speaking on the condition of anonymity as his company works with Volkswagen. The company’s headquarters continues to be optimistic about India although he agreed that the local operations need more attention. “China has always been a strong market for Volkswagen.
The focus on China is very different and India is different— (it’s a) very different market and it needs a very different treatment both from…the way we do business out here and also from the product side. It has to come in a coordinated scheme of things to make a bigger impact here,” he said. The expert cited above said that while Volkswagen would do well to strengthen its network; it also needs to be competitive on the cost front. “What it needs in order to compete on the price front is an engine plant and a smaller car than Polo,” he said. “The Indian car market is and will be primarily a small car market and no company can afford not to be present in that segment.” Saxena agreed.
“I think smaller cars or hatchbacks will drive growth for us. Even going forward, it will remain as a major segment. If you may look at it from a 10-year perspective, it may come down a bit but it will still be a major dominating part of the segment. If volumes remain there, then our volumes will also come from there.” Volkswagen’s India Strategy
The VW Group also owns 49.9% of Porsche and set to take 100% ownership in the near future. 2001 – Launched the Skoda brand and started selling the Octavia 2007 – The VW Group also added Audi, Bentley and VW to their Indian product line. These cars were available by importing them individually; however servicing was always an issue since they didn’t have official dealers on the ground in India 2011 – VW will add the high-performance brand Lamborghini to the mix. They will most likely unveil the first Lamborghini showrooms when they ship the highly anticipated fire breathing 691hp Aventador to India.
SummaryOverall, the timing of VW’s entry into India couldn’t have been more perfect as other competitors have been busy with their own problems. The American automotive giants are dealing with their domestic demand issues. The Japanese automakers are taking a very slow approach to India when it comes to their luxury brands – Acura, Lexus and Infiniti. Lastly, the German automakers Mercedes and BMW have been battling for the top spot for number of cars sold in India. BMW took the crown with over 6,200 cars sold in 2010, which is a very small piece of the overall Indian car market. Since the VW Group has many brands and able to target a much wider audience it will most likely lead overall sales in the years to come.
With its headquarters in Pune, Maharashtra (India), the Volkswagen Group is represented by three brands in India: Volkswagen, Audi and Skoda. The Volkswagen Group is completing 10 years of its India journey which began with the entry of the Skoda brand in 2001, Audi brand and Volkswagen brand in 2007. Each brand has its own character and operates as an independent entity in the market. Volkswagen Group India is a part of Volkswagen AG, which is globally represented by 9 brands- Audi, Bentley, Bugatti, Lamborghini, Scania, Seat, Skoda, Volkswagen Commercial Vehicles (Volkswagen Nutzfahrzeuge) and Volkswagen Passenger Cars.
The product range extends from low-consumption small cars to luxury class vehicles and trucks. The Group operates 60 production plants around the world. In total more than 370,000 employees produce more than 26,600 vehicles or are involved in vehicle-related services each working day. The highest volume brand of the Group is Volkswagen. Europe’s most successful car brand has made successful inroads into the Indian market. Volkswagen presents itself in a variety of segments as a premium manufacturer of high-volume models.
As a first step, the Volkswagen brand launched the globally successful Passat in 2007. To expand its portfolio and cater to the mid segment, Volkswagen launched one of the brand’s bestselling models, the Jetta, in India in July 2008. Both the sedans are being assembled locally. The iconic New Beetle and the high-end SUV Touareg were introduced in December 2009. Also available is the high-end automobile Phaeton.
Recognizing the importance of an extensive dealer network towards scripting along-term success story, the brands of the Volkswagen Group are setting up dealerships spanning the entire country with Volkswagen, Skoda and Audi having in total around 120 dealerships across the country today. They are not only laying the foundation for a substantial increase in sales but also doing the groundwork for offering a first-class all-round service, taking customer satisfaction to the highest level. Keeping this in mind they launched their first Group Logistics Service facility recently that would help make their dealer network become more efficient and smoothen the entire process of service. In the period between January 2009 and December 2009, the three brands of the Volkswagen Group have together sold around 19,000 vehicles in India, an increase of 1.4% over 2008 in a year marked by recession in the auto industry.
A crucial element of the Volkswagen’s strategy is to establish a long-term presence in India is the Group’s production facility near Pune in the Chakan Industrial Park. The investment with a total sum of around INR 3,800 crore (580 million Euros) is the biggest investment of a German company realized in India so far.
The plant, one of the most modern in the Volkswagen Group has a high level of vertical integration – not least attributable to the high share of local suppliers. The recruitment is of some 2,500 employees at the end of 2010, primarily from the region itself. With the investment, the vertical integration of suppliers and the employment of people Volkswagen will thus demonstrate its commitment to the new site. Simultaneously Volkswagen contributes to a positive development of the economy of the region and of Maharashtra at the same time.
In recognition of its efforts in India, Volkswagen India won the coveted ‘Automotive Company of the Year 2010’ award at the Inaugural Golden Steering Wheel Awards India presented by the leading automotive magazine, Auto Bild India.
Peugeot to adopt Volkswagen strategy for India entryPeugeot is treading the line which Volkswagen, the continent’s largest car producer, had adopted to make its long-awaited debut in the Indian market. The French company, which is the only large automaker not present in India,is aiming to position a premium sedan which will compete with Volkswagen’s Passat before gradually shifting to lower segments. It will, in fact, be a re-entry for Peugeot, which had exited the country more than a decade ago after it suffered consistent losses. ||
Peugeot is gunning for the launch of the Peugeot 508 premium sedan in India before the end of 2012. The car will be priced in the range of Rs 20-25 lakh. Apart from the Passat, the 508 will have to compete for space against Honda Accord,Toyota Camry, Nissan Teana and the Superb from Skoda Auto. Although volumes in this premium segment are on the lower side, which is about 1,900 units a year, Peugeot is trying to position itself as a premium brand in India before moving onto the volume generating compact hatchback segment. “The company is looking at a top-down strategy for India.
After its exit from the country nearly 15 years ago, the company is cautious on its re-entry. Globally, the brand competes with Volkswagen and its other brand and for India, it will not be different,” said an industry source. The company is in the process of setting up its manufacturing facility in the country but has not finalised the location. Volkswagen, too, had marked an India entry with the launch of the Passat in 2007 before moving onto other models, both in upper and lower ends.
After positioning its brand at the premium end, the German major finally launched the Polo (a compact car) in 2010, its cheapest car yet. Recently, France’s second-largest car maker, Renault, adopted a similar strategy, making a re-entry with the launch of the Fluence premium sedan, in an attempt to shed its image as a manufacturer of the no-frills Logan sedan. Peugeot is also aiming for a launch in the premium hatchback segment in India, which is also the fastest growing segment in the country.
According to sources, the company is looking to enter the segment where models such as Maruti Suzuki Swift, Ritz, Nissan Micra, VW Polo and Hyundai i20 are already present. The French automaker is considering its hatchbacks like Peugeot 107, 206 and 207, being sold in European markets. Additionally, similar compact car models under the Citroen brand such as C1 are also being considered for India. A detailed questionnaire sent to Peugeot remained unanswered. The company was engaged in a detailed study of the India automotive market and had conducted talks with several states for a full-fledged manufacturing facility.
An announcement to this effect was expected to be made in the first months of this year. Announcement relating to Peugeot’s official entry was thought to be one of the prime disclosures that was supposed to be made during French President Nicolas Sarkozy’s visit to India in December last year. However, failure in signing agreements for acquiring land for the proposed facility led to the last minute pull back, added sources. Tamil Nadu, Andhra Pradesh, Gujarat and Maharashtra were the states who had held talks with the French company. Sources said Peugeot is now looking at unveiling at least some of its models at the Delhi Auto Expo.