Interview| We’re on target to achieve the 3% market share goal in the next five years : Steffen Knapp

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Updated: August 19, 2019 12:55:44 AM

For instance, German automaker Volkswagen, which has had a reasonable success with the Polo hatchback, arrived late to the party in the Indian compact sedan segment (with the Ameo) and still doesn’t have a sub-4 metre SUV.

Interview, market share, Steffen Knapp, Volkswagen Passenger Car, industry news, Volkswagen, Toyota, Renault Nissan, SUV,  German automakerSteffen Knapp, Director, Volkswagen Passenger Cars

It shouldn’t come as a surprise that the world’s three biggest automakers—Volkswagen, Toyota and Renault-Nissan—are struggling to secure a foothold in the Indian market. All three, put together, have just about 10% market share in India. Analysts opine a major reason is inconsistency in their product line. Over the last 10 years, they have either delayed new vehicle launches or discontinued existing products, and this can lead to consumers’ trust on these brands going down.

For instance, German automaker Volkswagen, which has had a reasonable success with the Polo hatchback, arrived late to the party in the Indian compact sedan segment (with the Ameo) and still doesn’t have a sub-4 metre SUV.

Steffen Knapp, director, Volkswagen Passenger Cars, argues that the company caters to the affluent and aspirational middle class. “When Volkswagen entered India, this target group wasn’t very big. Now, there are 60-70 million people in this group, and this is an opportunity for us.”

Moreover, he says, there is no compromise with quality, safety and fun-to-drive character of the company cars. “Our cars are sturdy—a roof laser welding process seamlessly welds the roof to the body, creating a dampness-proof flawless beauty. They are carved out of 100% galvanised steel, have a six-year anti-perforation warranty, and feel like new for years,” Knapp says, adding, “it is difficult to bring all these technologies and safety features at an affordable price point at which most competitors sell their cars in India.”

While Volkswagen cars are expensive to buy, it is assumed, perhaps rightly so, that they are expensive to maintain as well. For changing this perception, the company has been working on ‘ownership experience’. For example, it introduced three free services up to 15,000 km or one year, standard warranty revised to four years or 1 lakh km, a roadside assistance package, etc. Knapp says these steps have helped reduce the total cost of ownership of Volkswagen cars by one-fourth, and with increased localisation and ‘child parts strategy’, it will be reduced further. “We are working towards increasing localisation in cars up to 93% from the current 82%. Also, the ‘child parts strategy’—replacing specific parts rather than the module—will make servicing cheaper,” he says.

These steps, he adds, will help the company achieve its goal of 3% market share in India in the next five years. “That means selling 1.2 lakh cars per year, and for this we have to create a sustainable business model where we get new products, make our existing products more affordable, and become more reachable as far as network is concerned,” he says. To reach the hinterland, the company has created a model called pop-up stores. “We need to be far more approachable especially as far as servicing is concerned, and currently have five mobile service trucks running across India.”

The industry has been hit by recession, and yet Knapp says Volkswagen has neither lost dealers nor have its dealers lost a lot of money. “One, while we sell far fewer cars compared to the market leader, our ticket size is much bigger. Two, our customers are usually prepared and able to pay for the value they see in our cars, so we don’t usually run discounts. Three, we have about 120 dealers spread across India, so there is no cannibalisation in the network. We are fortunate to have done a lot of right things in the past, supporting our dealers; they are the backbone of our future success.”

While Volkswagen has introduced a lot of technologies in the Indian market—such as DSG gearbox and TSI engines—how many customers want to pay for these expensive features anyway? “What we offer is value,” Knapp says. “And there are customers in India who see value in the technology they are getting. This is reflected in the number of repeat buyers and first-time buyers we get.” Also, 18% of its customers are women who drive—far ahead of other manufacturers who primarily have male buyers. “The future lies in the brand, and such steps help build a strong brand.”

At the same time, he accepts that Volkswagen is currently not in the first consideration set of most car buyers in India. “We did a market research and found that the ‘unaided awareness level’ for Volkswagen as a company is just 32.7%. We are working on it.” This strategy, he says, is called India 2.0 project that is, interestingly, being led by Skoda—the company’s arm. “Skoda is very flexible, its decision-making is fast, and they work in a cost-oriented way—the three things we need to succeed in a market such as India.” This Skoda-led project aims to make more efficient use of the existing synergies. Volkswagen Group brands—Volkswagen, Skoda, Audi, Porsche and Lamborghini—will maintain their individual identities, dealer network and customer experience initiatives.

Globally, since 2015, the name Volkswagen has been synonyms with Dieselgate, probably the world’s biggest car emissions scandal, but Knapp says that, in India, there has always been compliance with local laws. “We have not disobeyed any rule, and that’s crystal-clear. We don’t want our customers to feel, at any time, that there is anything wrong with their vehicles.”

With Bharat Stage 6 norms coming into play from next year, Volkswagen will pull the plug on the diesel Polo. “Three years ago, the diesel-petrol ratio in the Polo was 40:60, and today 88% sales are of petrol model. Customers have also realised that unless they are driving a particular distance per month, diesel as a fuel doesn’t make sense,” he says. “With BS6, the price of diesel Polo will increase by about Rs 1.5 lakh, so it doesn’t make business sense to continue with it.”

The company, however, will continue selling diesel Vento post-BS6, where the diesel-petrol sales ratio is 40:60 right now. The face of Volkswagen in India is clearly the Polo. “It is one brand that we constantly upgraded. We have invested a lot in the Polo, and we did a lot of things right,” Knapp says. That success can be measured in the Polo completing 10 years in India, and having sold a respectable 2,58,545 units (domestic wholesale). If only Volkswagen was as stable with other product lines, it might have been in the first consideration set of most car buyers in India. Knapp says it will soon be.

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