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Old 2nd September 2011, 15:35   #1
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Default Is VW confused about their strategy in India?

Over the past few months it looks like VW is confused with their strategy in India. They have a decent lineup of products but they seem to be getting cannibalized with their sister companies Skoda and Audi. There's nothing to distinguish VW from Skoda or Audi. I'll try and explain what I mean with examples.

1. Polo: Excellent hatch with very good looks and good dynamics and solid built. But you have the Skoda Fabia that has the same engine options, same dynamics and build quality and is infact a little more spacious than the Polo. Only the looks are against it. The Fabia is priced cheaper than the Polo and is almost similarly equipped as well. Skoda after sales are supposed to be poor but VW hasn't set a benchmark themselves with their service experience. Infact their pre-sales experience itself is found to be lacking.

2. Passat: The Passat is like the sandwich and is really getting squeezed. I haven't seen a single new Passat on Bangalore roads ever since launch. I thought I saw 2 of them till I realised both were TD cars.

The Passat is priced at 30L on road bangalore for the comfortline and 32.2L on road for the highline. That is smack bang in Audi A4 territory as well as BMW 320d and X1 range. Infact the highline is more than the 320d and X1! The VW does not carry the brand image of an Audi or BMW and that's obviously what's hurting it even though it's a fantastic package. The A4 2.0TDI has the 140bhp with an older gear box compared to the Passat's 170PS and 6 speed DSG.

On the other end you have the Skoda Superb. Fantastic car with class leading rear space and an option of Petrol and diesel engines. The petrol 1.8TSi with 7 speed DSG is 8L lesser than the Passat comfortline whereas the diesel is 5L lesser with a 140PS 6 speed DSG. Both cars are similarily equipped with features but the Superb wins with rear seat comfort.

In effect why would someone go for the Passat. If a buyer was looking for rear seat comfort and VFM it would be the Superb and for driving pleasure the BMW or the Audis. The Passat is stuck in between with no USP on it's own.

3. Jetta: Now we come to the recently launched Jetta. Between VW and Skoda, VW was supposed to be the premium brand and Skoda the VFM one. The new Jetta sure is priced at a premium compared to the Skoda Laura but it feels nowhere near as premium as the Laura and infact feels very close to the japs. My Altis has some better plastics compared to the Jetta's. No leather seats, no climate control, no sunroof, no xenons and the price is still more than the Laura. On top of that the DSG is only available with the so called "fully loaded" Highline and is priced at 22.2L on road bangalore. The Laura has all the features I mentioned were missing in the Jetta and is priced a lakh lesser with DSG. Both cars have same engine and transmissions. Skoda even offers the DSG box on the base Ambiente.

So the premium brand has lesser features, poorer quality but is still priced at a premium compared to the VFM brand that has better features much better quality? Confused? So am I. The worst part is the "premium" Jetta looks identical to the Vento which is a segment down. Ajmat and myself were totally foxed when we walked into the VW showroom. We were disappointed that there was no Jetta on display till the sales guy said "Sir it is this one" They parked it next to a Vento and there was no way one could make out. Initially we were like there was no way we would get confused as we knew our cars way too well.

4. Vento. The final straw. So the Vento was the VW saviour. The only car in it's portfolio to distinguish it from Skoda. The ace up it's sleeve so say. Yes but now even that will not last for long as Skoda is bringing in the Lauretta (For heavens sake what were Skoda smoking when they came up with that name)

The Lauretta is the exact same car as the Vento and looks like a mirror image except that Skoda slapped the Fabia's front end onto it. It will most likely come with the same engine options as the Vento and will most likely be priced lesser than the Vento. How is VW going to sell the Vento when the opposite showroom (Ironically, in bangalore Skoda dealer is located almost opposite to the VW one) has the same car at a lesser price.

I just don't think VW have that much brand advantage to leverage over the Skoda.

So basically the 4 cars above sums up the entire VW lineup (except for the niche beetle). I haven't forgotten the Phaeton and Touareg but didn't mention them as the Q7 and X5 are whooping the Touareg and the A8, 7 and S class are doing the same to the Phaeton.

With almost their entire lineup now being sold in India I'm not sure what VW has planned for it's future but it's looking they have a huge uphill battle and unless they pull out a few rabbits from their hat they may end up going the Honda way.

If I were VW I would do some introspection and find ways to clearly distinguish between the 3 brands. If VW wants to be the premium player then the cars need to get better equipped like the Polo, Vento and Jetta. If it wants to go the VFM way then they need to look into pricing.

Do you guys think the Golf will work in India? Maybe the Tiguan? What about getting the Polo GTi trim with a 170PS motor? Maybe an AT option in the Polo?

What does VW need to do distinguish themselves from the pact?
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Old 2nd September 2011, 15:50   #2
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Nice comparison, made me think a while what could VW come up with to tackle the competetion. Firstly improve the pre sales and post sales image which presently is not too inspiring. Atleast there they can have an edge over Skoda which has been long time reeling under. Introduce Golf ASAP which will bring a fresh look. Golf will definitely up the ante until Skoda comes up with a competition. How about the Golf plus with a 2.0lt TDi engine.

I dont whether we can expect a Scirocco or a Eon any sooner in India.

Skoda is bringing in the Lauretta (For heavens sake what were Skoda smoking when they came up with that name)
Maybe the earlier names like "Laura" was too hot to handle.
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Old 2nd September 2011, 15:53   #3
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Default Re: Is VW confused about their strategy in India?

Spot on vid6639. Well written.

VW wants to address the mass market with its Polo (+ Fabia) and Vento (+soon Lauretta). But their Dealerships and Service Networks are not geared for the mass market. The Dealers have not up their game as they feel that they are addressing the higher end market only.

The Indian Middle Class has a complete different set of expectations and can be very unforgiving. After Sales Service is very important and will hold they key if they will have long term success in India. They need to ensure that the resale values hold which will other wise hurt them bad too.

The waiting periods are not doing much good for VW too. They need to balance this out ASAP. More cars on the road will only help their cause.


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Old 2nd September 2011, 16:17   #4
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Default Re: Is VW confused about their strategy in India?

Well said Viddy, I must add that previously, VW and Skoda cars at least looked different although very similar under the skin. With the Lauretta (based on autocars pictures), it is merely a Vento with a chrome grin.I don't think the Indian consumer are idiots when they see which is the value package on two similar cars.

Last edited by Rudra Sen : 4th September 2011 at 22:25.
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Old 2nd September 2011, 16:29   #5
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Default Re: Is VW confused about their strategy in India?

I agree with you vid6639. VW needs to distinguish between its 3 brands (not counting porsche and Lambo here). I guess they could look at making

Skoda the "affordable German/czech car".

VW could be the premium/sporty brand.

Audi-- Leave it the way it is.

For this strategy to work they will have to figure out a way to make Skoda's cheaper by about 10%. Once they do that, they will have a clear price gap between Skoda and VW.

Currently they are following the GM path (and we know how that turned out for GM). The highend Passat is roughly the same price as the base A4 in the US as well. I don't think that matters much to VW. The passat isn't their cash cow. They need to do better in the other segments.

As far as the Golf GTI is concerned, I think it will do alright provided it is priced at around 10L. Any higher and its headed the Beetle/Fiat 500 way.

Instead of getting the Golf GTi, I hope they get the Polo GTi to India. There are rumours of the Jetta getting the 1.4 TSI engine. If that does happen then they might as well plonk that engine in the Polo and sell the GTI version in India. Chances are that they will be able to sell it at around 8L. If that happens then they will be able to truly position themselves as a premium/sports brand in India.

Overall I think the positioning should be

Skoda Fabia - 4.5L - 6L
Skoda Lauretta - 7L - 9L
Skoda Laura - 10L - 14L
Skoda Yeti - 13L - 15L
Skoda Superb - 16L - 20L (Sure the V6 can be about 24L)

VW Up - 3.5L - 5L
VW Polo - 5L - 7L (8L if they get the GTI)
VW Vento - 8L - 11L
VW Jetta - 13L - 16L (The TSI will be cheaper than the diesel)
VW Passat - 18L - 25L (For the love of God bring back the TSI)

Needless to say the A.S.S has to improve across brands.
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Old 2nd September 2011, 16:42   #6
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Default Re: Is VW confused about their strategy in India?

Very interesting analysis @vid6639.

After reading it, and having a rather long think about it, I wonder. Does Volkswagen AG (the group) actually have a India strategy at all? Or are VW, Audi and Skoda doing whatever they want with no reference to a game-plan?

It is very hard to draw parallels between brand images of VW, Skoda and Audi between India and Europe. And, given that Skoda had already established itself as the slightly premium but VFM brand (which VW is to Europe, by the way), I guess it required some serious brand and product positioning when VW and Audi entered. Which just did not happen.

So what next? Which way do we think Volkswagen is headed?
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Old 2nd September 2011, 16:50   #7
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Default Re: Is VW confused about their strategy in India?

VW has gone the Audi way, Audi went the BMW way, in terms of all the cars having the same family look.

Scirocco started the new VW family look and they have taken it toooo far!

even the touareg looks the same. i have not been able to spot the difference in the Jetta and the Vento. they look the same to me from the front.

when VW was launched, Skoda cars were priced higher than the VWs.

so Skoda was asked to lower the price to make VW look the premium brand. but i think this made Skoda the VFM brand and also it had a 10 year head start compared to VW!

uphill task for VW in india. they better bring in the UP!

Golf would be a very high premium hatch car in terms of sales, Honda JAZZ sales is an example of very high premium hatch.
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Old 2nd September 2011, 16:53   #8
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Default Re: Is VW confused about their strategy in India?

Very good comparo and analysis, vid. I was just wondering, if the operations of VW & Skoda can be integrated, esp. sales and A.S.S. (of course not a la Tata-Fiat combine). Considering the sparse network of these two brands, Skoda -VW selling under the same roof won't be a bad idea... But this would only be possible if they position their offerings intelligently, maybe something as suggested by HKap
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Old 2nd September 2011, 16:55   #9
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Default Re: Is VW confused about their strategy in India?

If we talk pure numbers, then the only hit in VW India's portfolio is the Vento Diesel;every other car in their portfolio is a sales dud or under performer for no fault of the car per se.

Even the vento diesel has to sweat it out with the verna diesel now.

They gotta act fast. Else it'll be the case of pre 2011 Honda India.
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Old 2nd September 2011, 17:05   #10
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Default Re: Is VW confused about their strategy in India?

Spot on vid6639.

IMO VW was doing great before they brought in the new Jetta where they have gone horribly wrong. Quite knowingly the have placed the Jetta in such a way that they want it to be an image booster, an aspirational model if you may, for their lesser cars such as the polo and the vento. As i see it, there was nothing wrong with the older Jetta, it was just lovely. The only fault with it was that it did'nt look like the vento and the polo. Clearly VW dont want the Jetta to do volumes or else we would have seen them price the Jetta more conservatively.

Also as regards to Passat, i think it differentiates itself from Superb by the excellent level of kit on offer, more powerful engine, better looks( just my opinion. No offence to Superb owners) and sublime quality. It is especially targeted at individuals who like to have a great quality car but still stay under the radar.

As to their lineup, i think the golf can work. Bring in a great set of engines, not some 1.4 Tsi but something better. 1.8 Tsi and 2.0 Tdi would be great. There are a lot of enthusiasts out there who don't mind paying the price for what they buy.
Among others they should bring in the new Tiguan. And how about the VW Touran pitted against the upcoming MSIL 7 Seater.


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Old 2nd September 2011, 17:19   #11
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Default Re: Is VW confused about their strategy in India?

The reason the way things are is because of strategy that was adopted earlier.

As I had read somewhere that VW had had this strategy of having Skoda brand in all underdeveloped markets and having VW in all developed markets.

But later with the growth of indian markets VW realized that India is a market they would have want to end up missing, thats why they came to India rather hastily.
- Now they were caught up with thier own misgiving, all thier best products had a cousin in Skoda already being sold.

They know they will end up in this situation, but took the call to launch thier products anyway and I am guessing over a period of time, they will modify the Skoda portfolio than tinkering any VW products.

Bottomline: This is a result of a strategy gone wrong, earlier. Vw is correct it now. The current mix up is just a teething problem. Things will be set up in sometime.
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Old 2nd September 2011, 17:20   #12
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I do not see a problem with this strategy. Think of it as VW's group strategy. As long as i'm able to sell cars from my group, i'm fine with it.

If I sell lesser VW and more Skoda, theres no harm in it. Agreed that there is less presence of VW as a brand. But does it really matter. What if my intention is NOT to garner volumes from Phaeton, Passat or the Jetta? They are there just to build my brand and I will showcase them wherever possible and beat the trumpet of the VW prowess.

The Polo and Vento seem to be doing decent numbers. Tomorrow after the UP! Is launched, 3 years down the line they may be comfortable sharing it with Skoda to develop something similar maybe. Works fine for me. Its the overall group volimes that interests me.

Do I have a point? Just my 2C
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Old 2nd September 2011, 17:50   #13
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Default Re: Is VW confused about their strategy in India?

Originally Posted by karpusv View Post
As long as i'm able to sell cars from my group, i'm fine with it....Do I have a point?
The VW board will look at just that !! and yes you do have a point !!

VW sales first seven months globally are 4.75 million vehicles and Skoda
523200. Both have grown 14% and 20% respectively. (wallstreet journal)

Somewhere someone is playing their game right

Here in India you do have a slightly weird situation but the game is so tiny I doubt if its causing the VW board to sweat. In eastern Europe Skoda appeals to a wider base (add India now) and VW is the traditional favorite elsewhere. In UK and many parts of Europe Skoda is a fast growing brand and its all a postive sign for VW as a group. They sell Skoda where it can sell and VW elsewhere ! So you will see a lot of mixed packaging and confusing signals when you compare the products directly.

And for India VW will have to play the game slightly differently. Now that they have the VW brands here they won't simply yank the Superb out to allow the Passat to thrive. I think they'll let the two brands compete

In hindsight when VW acquired Skoda they would have shut the brand down had it not been for the strong loyalty in Eastern Europe. They've actually managed the brand perfectly and have a winner in their fold longterm, albeit some clash and cannibalisation of sales with VW in markets such as India.

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Old 2nd September 2011, 18:01   #14
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Default Re: Is VW confused about their strategy in India?

Very interesting thread. Shall be glued to it.

The Skoda Lauretta launch defies all logic, given that Vento Tdi owners still face 4 month waiting periods (e.g. Ninjatalli) and the petrol stockpile shows no size of reducing (c'mon, how many low-interest loans, cash discounts and IPL editions will you come up with, Veedub?) Wonder why they want to add to the complication by having another set of cars under a separate brand. The Skoda brand, as someone rightly pointed out, had acquired a cult status as a premium brand in the absence of competition and now VW AG is probably wondering how best to position the VW brand (Audi is too far up the value chain, wouldnt worry too much) relative to Skoda.

They got it right with the Vento but ended up somehow positioning the car LOWER than their flagship Skoda: the Laura. Disaster. The market does not operate in vacuum. Segments often overlap and customers include cars across segments in their consideration set (I for example considered both the Laura DSG and the Vento AT before settling on the latter).

They got it wrong with the Fabia, overpricing it in their eagerness to position it as a hot hatch and killing the price after deleting features left, right and centre.

They got it right with the Superb: pure VFM proposition (the same space the Vento occupies in the C segment).

What would I have done if I were VW AG?

- Differentiate the Fabia from the Polo. Make the latter more aspirational than it is: plop in a 4-potter as standard, for example. Sell the Fabia as an entry-level hatch.

- Kill the Lauretta. What on earth are you thinking- cannibalising your own brand that way? If you must, launch it with a sub 1.5/100 HP engine and price it significantly lower than the Vento.

- The Jetta is dead already. either make it look less like the Vento and give it features it begs for at that price point, or just bury it quietly and we pretend it never happened.

- Passat as a contender for the A4/3-series buyer's affections is a big of a stretch. VW may as well go the whole hog and sell only the highest variant wth a couple of yummy engines tossed in (3 lit TDi? 2 lit TSI?) Then perhaps they may have some takers. Customers are stupid : you say "German engineering" and they get excited. Don't believe me? Check VW's Facebook page and how they're positioning the "new" Jetta engine (that has been doing duty in the Laura for years).

- Launch the "small car" for God's sake under the Skoda brand. With Brio around teh corner, they should have that flank covered.
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Old 2nd September 2011, 18:32   #15
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Default Re: Is VW confused about their strategy in India?

Holy smokes! Is it serious that Skoda have named their car based off the vento as the Lauretta??

The most glaring error VW have committed I think is with the new Jetta. No DSG for the base and lesser kit than Laura and more expensive!
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