Volkswagen India recently launched its Passat sedan in India, making it the last of the five launches committed for India two years back. The company, however, didn't launch the electric version of the Passat showcased at the 2016 Auto Expo, which was a bit surprising given the push by the Indian Government for electric mobility. In order to understand the reasons behind this and to get a lowdown on the roadmap for Volkswagen in India, we caught up with Steffen Knapp, Director, Volkswagen Passenger Cars India on the sidelines of the Passat launch and his talks suggest some interesting things to watch out for.
Express Drives: At the 2016 Auto Expo, Volkswagen showcased the electric version of the Passat and now there is a lot of push from the government for the electric vehicles. So, why not launch the car just to get a feel of the market?
Steffen Knapp: One needs to consider what is the demand for the product and only then involve areas such as network, system, and planning, etc. You have to see the balance. I think that if electrification will come to India, it depends a lot on the infrastructure and the willingness of the Government to really go for that sort of stuff. I am confident for VW as I know that we are ready with a lot of developments. In 2020 we'll come with a flood of new cars and for now, the investments are done and now we are talking to our suppliers, we are securing production volumes in order to be ready by 2020. The I.D. cars have already been shown at the Frankfurt Motor Show. So if the market is ready, I think we can be ready too. But there are two requirements. One is the infrastructure and other is the willingness of the customers in India to pay the amount of money which is required for such a solution. If you look into the details of VW and the European electrification concepts, it's often a leasing concept which would require a trade cycle via used cars up to reusing the car and also using the batteries for other purposes such as billboards and more. So here it is a complete cycle you have to think too.
Also, we have limited manpower and resources right now and they all need to focus their work on the essential parts where we can drive the business. So, GTE is nice to have but it isn't my key focus at this time. I can only relax and I can say our parent in Wolfsburg has this technology and there are still investing in battery and investing billions in battery producing facilities and developing the recycling of those batteries. So, once everything I mentioned is in place, we'll be ready to jump in Indian market with our electric vehicles.
ED: Recently, EESL rolled out a huge order of 10,000 electric vehicles. With such numbers do you see a scope for developing low-cost EVs for India?
Knapp: If you look at the statement of Volkswagen for our small electric cars, we said that this will be at the price of a VW diesel, Golf diesel. This means that the electrification strategy of VW is to replace a Golf diesel with an electric car. We are doing the same step like VW did with the Beetle at the time of its launch and we're bringing electrification to the mass market at a very attractive price and at a nice package.
The Indian customers would prefer a Polo electrified at a good diesel price but the basic is that you get the technology under control and that you achieve mass-scales since we want to sell 25% of our volumes in the form of electric vehicles between 2020-2025. Hence, if the economies of scales are big we can go directly to the Indian market and have a base technology at a good diesel price. Electrification is the future and I believe in that. I personally hope it comes a bit earlier as the environmental situation in India is really difficult. The problem in India is that basic infrastructure in some areas is still lacking and that is what is different in Europe due to which markets there are ready to step up to the next level.
ED: In terms of policies over the last few months we've had a lot of changes. Do you think the policy environment right now is conducive to long-term planning?
Knapp: For a company, stability is very important along with framework. The actions taken in November 2016 and July 2017 were in the right direction and were an absolute necessity as this will strengthen India's economy. The conviction and strictness shown for doing this now is right. This was a right approach, but for a company like VW it is important to have planned this a bit more in advanced. One needs to change systems, billings and is still left with a lot of things which are not completely clear and this takes a lot of time and energy for existing companies and that is the only criticism. The decisiveness and the direction is absolutely the right one but it could have been planned a little bit more precisely. We are still struggling and that is difficult for a business environment. I'd rather focus on selling the car than thinking of the right ways to pay the taxes.
ED: The Passat is the 5th product, last of what you had announced so now what's next?
Knapp: The first step is to use the potential of the existing cars. In the one year that Ameo has been in the marketplace, it is running at 5% segment share in the sub-compact segment, which is a good success but we can do more. The second is that Tiguan has been in the market only since July and we are already sold out and we will take advantage of that opportunity. We have sold 683 units of Tiguan and this segment will grow even further. With the Passat launched, we open the booking until the end of the year and the production for 2018 is starting so we need to exploit our full potential.
Then we have to see what kind of segments are interesting to us in future where we might be open and what kind of European products we can launch like the Passat and Tiguan and thereafter we look at what kinds of products we need to refresh. This is what we do now in the process of a 5-year plan. Our key strategy is also to strengthen our footprint in India. Indian market is important for VW. We have our own IT company in Pune, developing two software solutions for places such as Asia Pacific and Australia too. We have a lot of audit activities from India for areas such as Japan so overall, India is emerging as a growing market for VW, increasing its importance for us.
ED: Do you have any kind of number in mind like where you want to....
Knapp: Our target is to have a market share of three percent in the next five years, translating into a volume of around 1 lakh cars in India. This is in line with the growth of middle class, a segment of the population estimated to be around 23 million people. This growth will translate into doubling our volumes over the next 5 years. We are focusing on premium class and the middle-class customers and we need a right set of products to be successful.
ED: You mentioned that you have a 5% market share with the Ameo. Within Ameo, what would be the split between petrol and diesel and overall for VW India right now what is the petrol-to-diesel split?
Knapp: The split on Ameo is almost 50:50 but for Polo, it is 80:20 in favour of petrol as the GT TSI is still incredibly successful, partially due to the DSG transmission. On the Vento we are running on an 80:20 split, inclined towards diesel. But overall if you see, the tendency is moving to petrol. We are happy with our TSI engines as they are high quality and offer a great driving experience with the DSG.
ED: Off-late, there has been a lot of movement towards AT transmissions but DSG is also a bit expensive in India compared to other AT transmission technologies. Would you consider cheaper technologies such as AMT?
Knapp: This is one thing which we are considering as there is a mix of gearboxes here. The price difference for DSG is a bigger jump for the consumer but the transmission is excellent and so we are selling a combination of this to those who would like convenience in the traffic conditions here without sacrificing driving pleasure. DSG as a brand stands for driving fun and we want to maintain that.