Post-breakup with Tata Motors: Volkswagen-Skoda script turnaround in sales | The Financial Express

Post-breakup with Tata Motors: Volkswagen-Skoda script turnaround in sales

“Revenue is almost double and hopefully the profits should also double. We are profitable at the vehicle level but when you invest in a new project, typically the return on investments come in 2-3 years. Each of our models are profitable,” Gupta added.

Post-breakup with Tata Motors: Volkswagen-Skoda script turnaround in sales
It ranks third behind Germany and Czech Republic.

The breakup of Volkswagen’s proposed joint venture for making budget cars with Tata Motors in 2017 was seen as the end of the road for German car maker’s India plans by analysts. However, five years later the wheels have turned for the company with new product line-up and sales numbers looking up.

Between January-August of the current calendar this year, Skoda (part of Volkswagen Group) sold more cars than it did in the whole of 2012 which was the best year for the company in India. As for Volkswagen, the current year, is likely to be the best since its debut in the country in 2007.

Both VW and Skoda have together rolled out six models, including four SUVs using the MQB (Modularer Querbaukasten meaning modular transversal toolkit) platform in the last three years. While none of these launches were in the budget category, these introductions happened just when the Indian car market was undergoing yet another pivotal shift.

Demand for compact, budget cars have made way for more spacious and feature-rich sports utility vehicles (SUV). Waiting periods for such SUVs are now running into several weeks while hatchbacks are available off-the-shelf. From selling at a discount, VW and Skoda cars are now having a waiting period of 2-3 months.

“We launched the Polo and Vento in 2012 and we had reached 3% market share which was also our best year. From 2013 to 2017 we were averaging close to 45,000 cars a year. This year we should go back to above these levels at least,” Ashish Gupta, brand director, Volkswagen India told FE.

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The India 2.0 programme, which entailed development of its globally popular vehicle platform MQB to make it suitable for the Indian market, saw a complete overhaul of VW Group’s India product portfolio. Hatchback and compact sedans like VW Polo, VW Ameo, VW Vento, Skoda Fabia, Skoda Rapid got replaced by mid-segment SUVs like VW Taigun and Skoda Kushaq, sedans like VW Virtus and Skoda Slavia and high SUVs like VW Tiguan and Skoda Kodiaq.

This change nearly doubled the average selling price for Volkswagen, generating the highest margins for every car sold in India than it ever did before. The move to selling bigger cars pushed its average selling price to Rs15 lakh from around Rs 8 lakh during the days of the Polo and Vento.

“Revenue is almost double and hopefully the profits should also double. We are profitable at the vehicle level but when you invest in a new project, typically the return on investments come in 2-3 years. Each of our models are profitable,” Gupta added.

According to retail sales data shared by the Federation of Automobile Dealers Association (FADA), the apex lobby body of automobile dealers, the Skoda Auto-Volkswagen combine improved their market share to 2.28% by September end compared to 1.64% clocked during the same month last year.

VW’s certain risky experiments with the market paid off well. While all manufacturers decided to stay away from the sedan segment due to their fading consumer popularity, both VW and Skoda launched large mid-size sedans, Virtus and Slavia, respectively. Both models together control 50% of the market, split equally between the both. The Virtus sells more than 3,000 units a month, with certain variants carrying a four month waiting period.

“The last two years have not just been about changing the product portfolio but it was also about changing the brand itself. With the Taigun we have gone to ‘in-your-face’ communication. This change is seen in the way our dealers interact with the customers and how customers see us. And the change has worked very well,” Gupta added.

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First published on: 10-10-2022 at 02:45 IST