Suzuki effect: VW set to focus on premium cars

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Oct 4 2011, 18:42pm hrs
With the much celebrated two-year old global alliance of Volkswagen and Suzuki on tenterhooks, the Indian subsidiary of the German carmaker has evolved a new strategy to position its range of products in the premium category across segments. This, the company feels, would reinforce Volkswagens brand positioning in a country that is slated to enter the top five markets in the world over the next couple of years. Director (passenger cars) and board member of Volkswagen India Neeraj Garg ruled out being just part of the crowd.

In every segment we would be in the premium position. We dont want to be in the crowded segment. Coming from Germany there is an expectation from the product and to meet that expectation you have to add to that premiumness, Garg told FE. For instance, Volkswagens Polo though in the hatchback segment has been positioned in the premium category. The starting price of the Polo on road touches close to R5 lakh directly competing with Hyundais i20. Similarly, its mid-level sedans Vento, Passat and premium sedan Jetta are also positioned as niche products in their segments.

Analysts said that Volkswagen India was banking on Maruti Suzukis engineering capabilities to produce small cars that would have helped the company enter price sensitive small car segments to increase its volumes. However, since Suzuki has threatened to break out of the alliance, Volkswagen has been forced to restrict itself to premium categories. They may have to re-look at their business strategy for India. The partnership with Suzuki would have allowed them to look at lower price point models. However, now they cannot be a volume player, managing director with consultancy firm Protiviti Adithya Bhat said.

A senior executive of a leading car company said that while Volkswagen could concentrate on higher end models, its brand partner Skoda would look at addressing price competitive segments. I am guessing Volkswagen wants to weave a brand strategy which would be seen as a premium carmaker. It would target volumes through Skoda, he said. MD of Protiviti Bhat said, In the longer run Volkswagen would look at becoming a volume player but for that to happen they need to ramp up indigenisation of its cars, he said.

Volkswagens Garg said that in the last one year the company has increased local sourcing considerably in the Polo and the Vento. For Polo and Vento it (local sourcing) is a little over 70%. We have increased (localisation) from 55%-70% at the beginning. This is a continuous process that purchase people are trying to do. The optimal level is 100%. That needs a lot of investment, he said. In the April-August period this fiscal Volkswagen sold 16,042 units of the Polo, 771 units of the Passat and 750 units of the Jetta.