Volkswagen Goes for Major Overhaul
Pushed to being fringe players in India, Skoda is repositioning itself as a premium brand while its parent Volkswagen is realigning production with focus on exports
Europe’s leading carmaker Volkswagen (VW) is revamping its India strategy five years after it entered the market, where it got pushed to the fringes due to its inability to price products competitively and come up with enough fresh offerings. VW is reworking its production plan, with almost every second unit produced being earmarked for exports, to increase localisation, concentrate on building brand, improve sales and service, besides planning a new product portfolio.
It plans to invest .` 900 crore this year which will go towards a new engine assembly plant and a possible gearbox factory later, to move towards 90% localisation and overcome the handicap of lowering costs to compete with local rivals. In order to address the other key challenge of keeping pace with its rivals in terms of offering new products, VW has lined up about six new launches over the next three-four years, including a sub-4m sedan and an SUV. Moreover, the group will seek to ensure that its brands Volkswagen and Skoda no longer cannibalise each other in India. Mahesh Kodumudi, MD of Volkswagen India, told ET that India is one of the most discussed countries at the headquarters, but being part of a behemoth it takes a little longer to decide on strategy. “India is a very difficult market; it takes some soaking period. The company has learnt a lot in the past few years. India will be one of the strategic markets for us to support our global ambitions,” he said. India is on course to be- come the third-largest market for passenger cars and utility vehicles by 2020, he added. The German carmaker plans to roll out 200,000 units from its Chakan plant by 2017-18, up 100% from now. According to Kodumudi, VW’s focus has shifted from volumes and market share in 2011-12 to getting fundamentals right. VW has already started working on correcting the cost structure, improving customer interface. “We want to nurture and build the VW brand, rather than blindly go after volumes,” Kodumudi said, admitting that the product portfolio in India is ageing and they need to bring new products.
It plans to launch a revamped Polo in July. This will be followed by a minor facelift of the Vento sedan ahead of the festive season. A major Vento facelift is planned for 2015 with differentiated facia from the new Polo. VW also plans to re-introduce the Beetle and premium SUV Tiguan is also being considered for next year. “Whatever model I decide to do in the future, the sub-4 metre sedan or SUV, it will have integrated export strategy. I cannot look at India in isolation anymore,” Kodumudi said.
A revamped Polo is likely to hit the road in July