We got a chance to interview Mr Steffen Knapp, CEO of Volkswagen India during his recent visit to Bengaluru for the launch of New Polo and New Vento at Volkswagen Whitefield dealership.
Q1: In the last few years, 2 new car brands have started operations in India. How is Volkswagen reacting to this? Can Volkswagen continue to remain as Aspirational brand in coming days?
Clearly, our objective is to become most aspirational premium brand in India. So, you can define it as “Top of the volume” – obviously not in luxury segment. To become a Top of the volume player is our ambition – all our plans are focussed to get to this position. If a person purchases a Volkswagen it clearly shows the environment, somehow he made it. We believe the “aspiration” is one of the key triggers in India. Indian people are very very ambitious, by purchasing Volkswagen you can ensure you have achieved it and at the same time you make sure your family is in safe hands.
Q2: People in India prefer owning an SUV, even during the slowdown, the compact SUV segment showed growth. So what’s your take on it? Do you have any products in the compact SUV segment?
The analysis is completely true – the SUV segment is clearly No.2 in body styles. The market for Sedans are continuously going down. People in India are preferring high ground clearance, high seating position with good on road presence – We are aware of this development, Volkswagen will be working aggressively in bringing products in SUV and compact SUV segment in coming years. The first car which we showed in this segment was the Tiguan – we are quite happy with the sales. We are running at selling 150 cars in a month, much more than in the beginning when we launched it – so it has improved by 40% yearly. The next one will be India 2.0 vehicle, it basically has similar size of the Creta.
All around the world we have lots of SUVs, – the most sold SUV worldwide is Tiguan, it is the 11th most sold car in the world. We are now starting with the T-Cross which is basically the platform or basis for our upcoming Indian SUV. The engineering on the vehicle is done with Indians in mind. Indians are not too much into CUV, they want more rugged, rectangular, very bold appearance that is why we have to make changes to the T-Cross accordingly, but T-Cross is going to be the base for our upcoming Indian SUV. The upcoming T-Cross engine variant will be of petrol – our current focus is currently on bringing petrol engine to T-Cross based SUV in India. The other SUVs which we sell outside India are TROC and Atlas. We also have many SUV models in China and around the world. We are currently looking at what is adequate for India and are deciding based on that.
Q3: What about bringing Diesel engines in your upcoming models? What about BS6?
We have not yet decided, We have to see from our competition in terms of hiking prices for diesel BS6. The price increase could be as much as Rs 1 lakhs to Rs 1.5 Lakhs for Diesel. The development cost for building BS6 Diesel engine is substantially more – we have not yet decided on it.
Q4: Can you tell us more about slashing the parts price by 15% and making it more accessible to your customers – Are you really able to do that and how, what is the idea behind it?
It is important for us to address the total cost of ownership. The first step to make it happen is to bring down actual prices of the parts. In Q1 2018 we cut the parts prices by 15% – it hit our base line, we had to pay for it from our margin, which is not nice but it was necessary.
Our repeat repair quota is below 1% – how do we do it? By constantly training our team, specialize them in this area -. This helps us in getting customers and getting recurring services – we are making sure the customers stay with us. It looks strange, how do you do it – Like I explained accessing every sales person/staff whether he fits or not, secondly we have 3 brand academies, thirdly we have 3 big dealer groups, they have in house training centres which reduces the cost – because they don’t have to travel distance to get themselves trained.
The other concern is infrastructure in terms of parts availability, we previously had only 2 parts central warehouses. we have added an additional central warehouse in Pune – 1.5 million Euro substantial investment has been done.
The third bit of total cost of ownership is how customers live with the brand, do they have any problem – therefore we decided to offer our customers a big-big toolbox and we started offering 7 year warranty , we have also made provision for additional 1 special year warranty.
Service value package is available now for 1 year, 2 year and 4 year. You have all the services included in one package – say Rs 10,000 for 1 year. This is very important for customer’s peace of mind.
Today you can finance service value package via VW financial services. We also offer insurance for tyres, We are associated with Tyre brands like GoodYear and Pirelli – which are upmarket brands – they fit into our quality philosophy.
The last bit is you the media, who help us to change the perception – you can actually do nice things about it which nobody knows. And it takes long long time to change the perception. Showcase quality of parts, safety, comparisons. Currently we have a localization level of 82%, in our India 2.0 Project vision, we will be bringing the localization level to 93%.
Q5: How many dealerships do you have in Karnataka?
We have 9 investors in Karnataka and 16 outlets. Karnataka is one of our most important markets, in particular in Bengaluru we are extremely strong. We sell about 40% of Polo GT TSI across the nation and 60% of Polo GT TSI is sold in Bengaluru – we have very highly educated people in cities like Bengaluru who are globally exposed and who considers safety as priority.
Q6: The new generation Polo is available in International market- when are you launching it in India?
The 6th generation Polo is available in International market and has body size of 4 to 5 meters. Certain level of localization is required to bring products to India. As you know cars above 4 meters attracts heavy tax in India – I wish this would go away in the future.
Q7: How attractive is India for you for the investment purpose? The recent announcement by Government to bring Corporate Tax rate down to 22% – Does it make investment interesting for you?
Regardless from the corporate tax situation, we have interest in India market. More than Government, we believe more in the future of India . Of course the reduction in corporate tax is re-enforcing our investment plans in India. We recently announced that we will give back some amount of money to our customers – we have launched the corporate edition – it offers you 5-year warranty and provides total benefits upto Rs 4 Lakh rupees. Price today is just a point of orientation and nothing else. We are not offering any direct price cuts but in the form of benefits.
Q8: About the connectivity options, you have introduced a dongle which can be attached to the car and avail voice activated features- Is this a measure taken by you to combat competition’s (Kia and MG) connectivity offerings in this space?
Kia was not even available in the market, when we introduced connectivity features. Believe me, we are the first group in the world that has a dedicated board member only for digitalization. No other groups or companies in the world has done this before. For us connectivity is the key driver for the future. The recent ID3 launch in Frankfurt Motorshow, shows how serious we are in the connectivity domain. We are developing the entire eco-system where a cloud based system talks to the car. Connectivity is absolutely one of the key features going forward. Digitalization, autonomous driving and electrification – are the major trends which we are seeing in the industry for future and we are heavily investing on it.
Q9: Your competitors in India are investing in subscription models, shared mobility etc. Do you fear people not buying cars in the future, do you think people will buy cars?
I have no fear at all. First of all this segment represents only 1 or 2% of total cars. Of course it is a very relevant segment and our forecast is it will grow upto 4-5% in the upcoming years – it is dramatically growing. That is the reason why we also went this route – we have partnerships with ZoomCar listing Vento and Polo and there is a very good response.
Apart from this we have our own brand called as MOIA which is investing in shared mobility, autonomous solution. We also have partnership with Gett.
But in India, out of 1000 people, only 10 own cars, so the hunger for owning cars is huge. Do not extrapolate the situation in Bangalore to whole India, only in metro cities the concepts of subscription is well known but not true outside.
Leasing is little bit difficult in India because of the legislation but we are investigating into this coming next year. We have introduced something called “Volkswagen Secure” 6 months ago, which is a residue value based program. This is only available in corporate business centers.
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