VW needs to revamp strategy after break up

Written by Ronojoy Banerjee | Ronojoy Banerjee | Shweta Bhanot | New Delhi/Mumbai | Updated: Sep 14 2011, 09:22am hrs
The break-up of the 18-month alliance with Suzuki Motors could force the German automobile behemoth Volkswagen to review its strategy for the Indian markets.

Top industry executives from rival car companies and auto component makers feel that Volkswagen would require a new product plan for India to live up to its promise of becoming the number one car maker in the world by 2018 as the Indian market was central to its plans. Volkswagen was banking on using Suzukis expertise in building small cars and hoping to tap Marutis large network.

Ernst & Young India partner and automobile practice head Rakesh Batra said Volkswagen would have to look at its existing brands and come up with an aggressive product strategy for the Indian market.

You cannot get 10-20% market share if you are not in the small car segment, he said. He added that since the alliance was to develop a strong small car product line-up, VW could now look for a new alliance partner or develop it on its own. A Volkswagen India spokesperson declined to comment.

With the end of the partnership Volkswagen would be required to review its strategy for the Indian market once again, an industry executive told FE.

Volkswagen was hoping to tap the Indian market to increase sales. Now they would have to rely mostly on their own engineering to develop small cars for Indian roads, he said.

An executive of a leading passenger car company said that Volkswagens product plans would require a major overhaul.

The companys focus so far in the domestic market has been to produce high-end premium vehicles. As a result of which under brand Volkswagen it has only one small car Polo. They would need to roll out more cars in the small car segment if it wants to be reckoned among the major car companies in India, he said.

Volkswagen is a dominant player worldwide. Its product strategy has worked across the globe. While the Indian market is certainly different from other geographical locations it does not mean they cannot get it right in India, a leading auto component manufacturer from the Gurgaon-Manesar belt said.

He added that the uncertainties relating to the alliance could have impeded Volkswagens India plans. If the alliance breaks, Volkswagen will get the clarity that it cannot rely on any other player for increasing volumes. It might be good for the company in the long run, he said.

At present, Volkswagen India offers seven models across price points. In August the company sold 6,091 units compared with 3,531 units in the corresponding month last year. The companys hatchback Polo and the sedan Vento which is built on Polos platform sold 5,634 units during the month.