[AMG Power]

The Volkswagen Group and the Meteorology Department have something in common.

Predicting the future.

The Meteorology Department tells you what the gods will do tomorrow and the Volkswagen Group tells you what they will do tomorrow.

Admittedly, the Meteorology guys have it easy and get it right more often than VW does.

But folks usually find that Volkswagen has a better sense of humour.

And so we have another story / prediction / true lie / whatever, not from the Meteorology Department, but from VAG:

This time it's about VW "consolidating it's India position" whatever that may mean - usually means that the management has been a miserable failure and they've got to do something about it.

Some of you may remember that VW had earlier decided that Skoda was going to play second fiddle and VW was to be the main anchor of the group in India. Well, they've changed their mind. Now it's the other way around.

Read on to enjoy the joke and the punch line:

In 2017-18, VW sold all of 45,329 units in India, down 9.4 percent on its performance the year before. The carmaker also ended the last fiscal with market share dropping to a mere 1.38 percent in the Indian passenger car market. Volkswagen’s arrangement with Skoda that will have the Czech carmaker lead product development for the two brands in India promises much, but is yet to be green-lighted by the VW Group board. And even if the product partnership goes ahead as planned, the first of the new wave of VWs for India is still a few years away.

With little room to manoeuvre at the moment, VW is in consolidation mode in India. On the product front, the carmaker will rely on model updates to keep customer interest alive, but will also tweak its approach to sales. Citing the example of the compact sedan segment, Steffen Knapp, director, VW Passenger Cars, spoke to Autocar India of a more ‘regionalised’ approach. “Private customers in cities like Mumbai, where we have a big presence, are not running for compact sedan models because they perceive these as taxis. We have to realise that the compact sedan category is much more popular in the Tier-2 cities. So, we have just launched a road show where we will go to Tier-2 cities where we will prominently show the Ameo. We will also change the way of advertisement. We are not speaking in English any more. We will speak in the local language, so we are much more regionalised.”

Knapp underlined that VW will not turn its back on its premium portfolio that comprises the Tiguan and Passat. VW India has been allocated 1,000 Tiguans for the year which should meet demand.

Volkswagen has also chalked out a strategy that will prepare it for the next phase of growth, with focus on non-product aspects of the business. Knapp described brand, business from corporates, digitisation, dealer network, talent development and customer loyalty as ‘cost strategic’ pillars that the carmaker is working towards.

Source

[ksameer1234]

Originally Posted by AMG Power

We have to realise that the compact sedan category is much more popular in the Tier-2 cities. So, we have just launched a road show where we will go to Tier-2 cities where we will prominently show the Ameo.

I hope VW realises that no one will buy Ameo in tier-2 city either. Small cities and towns need cars with space to accommodate the family, extended family, neighbors and the like. This is where Polo/Ameo fails.

[rnidumolu]

Anyone who wants to operate in India has to build one big thing, TRUST. Maruti Suzuki & Toyota built it. In my opinion Talking in a local or regional language does not help if they don't do a honest approach by considering India as a serious market.

[Mad Max]

Expectation

- Nicer designs from Skoda backed by VW service standards and customers lining up to buy anything they throw at them

Reality

- VW designs remade with Skoda badge backed by even more pathetic Skoda like after sales with flies in the showroom.

Their management layer needs to be dragged behind the barn and shot. Can't imagine how a German company can massacre things so bad. We are not that bad a market to be so twisted to one brand only. I think many of us are willing to put our money where our heart is, especially if the after sales experience is good.

As the other TBHPian said, Trust is the core to sales. If they can't spend time repairing that, no consolidation, reconstruction, re-imagination, re-purposing works. It will be only relegation - to the last few spots.

[A M]

Originally Posted by AMG Power

On the product front, the carmaker will rely on model updates to keep customer interest alive, but will also tweak its approach to sales.


....



Volkswagen has also chalked out a strategy that will prepare it for the next phase of growth, with focus on non-product aspects of the business. Knapp described brand, business from corporates, digitisation, dealer network, talent development and customer loyalty as ‘cost strategic’ pillars that the carmaker is working towards.

Source

They are looking for that pot of gold at the end of the rainbow.


When the core of your business is hollow, on what foundation will you be able to find growth? To survive, a banyan tree has to grow secondary trunks when the primary trunk starts to become hollow.


Bring in new products ASAP VW; Don't rely on model updates, they are too old to update. Bring the Golf, Up and the new Polo. Bring the Fabia; improve the service and pay attention to customer experience and satisfaction.

[Zigor]

Do they even understand the meaning of the word consolidation?

I don't understand how are these incompetent executives earning their fat salaries and what gibberish are they telling the VW HQ in Germany.

The problem is - They don't have a strong portfolio. That's it!

Consider me. I drive a Polo diesel. I want to upgrade to another VW. Don't want the Vento since it is the same car with a bigger boot, few inches in the back, and inferior handling to my 205/55/r15 Polo. Guess what, I don't have the option to upgrade. There is nothing in the 20lac bracket. Not everyone can afford a Tiguan. There are potential customers in between

If things don't improve fast, VW will have to pack their bags and leave. Here I am, an honest customer with the perfect advice. VW India execs - are you listening?

[Latheesh]

Bring the latest Polo, T-Cross, and Virtus as early as possible. All three are based on the same platform, thus investment will be shared. That is all they need to do now.

[GTO]

If you come to think of it, it's so simple. All VW needs is good + new products. Not like VW India has to develop anything from the ground up either; they only have to cut-copy-paste cars from their global lineup (with some localisation, of course). Others like say Tata who design cars from a clean sheet of paper for India don't have it as easy. Even Maruti has to work with Suzuki.

The problem is VW Germany is not supporting India at all. VW HQ has been busy with a lot of things lately (especially the emissions scandal) and when they want to prioritise, India is a small speck for them compared to Europe, China etc.

VW has some fantastic cars overseas. It just needs them here. Let's start with the next-generation Polo which is expected soon. It'll turn things around overnight. VW still has immense brand pull.

Originally Posted by rnidumolu

Anyone who wants to operate in India has to build one big thing, TRUST.

Really depends IMHO. If your product has a USP or is a LOT better than the competition, customers will come. No one trusted or even knew Renault, but the Kwid & Duster were runaway successes. Look at Skoda - perhaps the most damaged brand in the country. The excellent Kodiaq & Octavia are doing healthy numbers. I don't think any 15-lakh customer thought too highly of Mahindra, yet the XUV500 had to come out with a unique lottery system to pick customers. Brand 'Tata' was also severely damaged, but just look at the numbers that the Tiago & Nexon are managing!

Of course, am not underestimating the importance of brand equity - biggest example is Maruti! Though, just saying...

[driven646]

As an unabashed VW fan, i really hope their HQ re looks at their India operations and commits to our market - they have so many great Cars in their lineup in Europe, that can be successfully sold here with the requisite investments and marketing strategy.

I own two VW's myself and across the extended family we have 3 VW's and 3 Skoda products with us - but looking at their numbers in China - i doubt India gets any importance currently.

[GTO]

An excellent article by the Economic Times. Some excerpts below:

VW is a truly iconic brand, painstakingly curated and nurtured over the past seven decades.

The constant churn in top management too did not help.

Audi took off with SUVs and became number 1 in 2013, but then fell into a vicious trap of selling through discounts. It’s relegated to number 3 now and sales are falling.

The sundry rejigs have punctured it further. The six years during 2010-16 saw three group representatives, four VW brand directors, four marketing heads and two sales heads.

You don’t need an outsider when you have people within to pull you down. A great company with good products can be spoilt with bad people.

Meanwhile, VW was happy exporting cars to fill up the plant; profitable operations meant there was no urgency to address the domestic market.

The decision-making outside India and lack of flexibility given to local management made it even more difficult.

Workshops are a hotbed of malpractices, which leaves the customer high and dry.

It is invariably the plant blaming the sales team and vice-versa.

There are three legal entities — Skoda Auto, which manufactures cars for itself, Volkswagen and Audi for a fee; Volkswagen India, which is a manufacturing entity producing Skoda and Volkswagen cars; and Volkswagen Group Sales India, which houses the group’s brand and sales operations. These are for VW, Audi, Porsche and Lamborghini but not Skoda, as the sales team of Skoda is already part of the manufacturing arm. However, Skoda’s sales and marketing uses the same premises as other brands. Not only have these structures added to the complexity, but also taken away single-point accountability.

Invariably, strategy creation and decision-making is completely taken over by regional or global headquarters so companies run the risk of local leaders and managers becoming “highly-paid puppets.

Something as elementary as a perfume in the aftermarket — if the local team wants to add to its bouquet — will have to be approved by headquarters.

With regulatory uncertainty, it has decided to skip small cars in the immediate future, which has surprised many.

Growth will only be possible with a new portfolio post-2020… in between, we will survive.

[chaudh2s]

Originally Posted by GTO

VW has some fantastic cars overseas. It just needs them here. Let's start with the next-generation Polo which is expected soon. It'll turn things around overnight. VW still has immense brand pull.

But the question is, are we ready to pay for the same spec Polo, as sold in Germany (13,000 Euro incl. mwst) which translates to Rs. 9.86 L ex-showroom price?
If they launch it as per Indian specs (and price it @ say Rs. 7.0 L ex-showroom), wouldn't we just demean VW and use our choicest expletives, for having launched a model, so different to global Polo?
One thing is clear, if Polo is launched @ Rs. 9.86 L, it would be dead before arrival.

[AMG Power]

Originally Posted by GTO

The decision-making outside India and lack of flexibility given to local management made it even more difficult...

Invariably, strategy creation and decision-making is completely taken over by regional or global headquarters so companies run the risk of local leaders and managers becoming “highly-paid puppets.

Some extracts from a Whatsapp exchange I had with the CEO of a VW Group company in India that confirms this approach by Global HQ:

"... Unfortunately have been told by HQ to stay off the Sales Service Marketing department within XXXX India since they got complaints that am asking too many uncomfortable questions!!..."

It goes on:

"They want peace and quiet among the top management and not have issues float to them. Unfortunately the customer experience on the ground is not something they can feel or understand. Any customer letter that goes to them just gets emailed back to us without them interested in the root causes."

[avishar]

Volkswagen is not going to work in India unless they start by taking a step back, and really understanding the Indian market. And by that, I mean getting off their high-horse. If they think that the Indian market is not important enough now, then good, they can join GM and catch the next flight out.

Look at the successful models on sale in India today. From a Kwid, to a Swift Dzire, Nexon, i20, Honda City, Creta, XUV500, Innova and Fortuner. The one thing which is common among all these models are that each of the manufacturers have worked hard to customize them for Indian conditions, tried to understand what the Indian consumer wants, and then launch them at a price that the consumers sees a value in. This is very important to understand. The Indian consumer will line-up to buy a 35 lakh ruppee car if the manufacturer has really done its homework, but they can equally shun a 1 lakh ruppee car.

For god sakes even FCA understood this finally and did a brilliant job by adapting the Compass for the Indian market. They sunk in money and took a risk!

This is what ails Volkswagen in India. They are loathe to develop cars for India. Their entire strategy revolves around people buying their cars just because of superior German engineering and the brand name. Those days are long gone my friend. You cannot be peddling out-of-production stuff and slap new decals every few months to get the public interested. You have to be thinking 5 years ahead and not just make knee-jerk reactions like the Ameo and Tiguan. Infact, knee-jerk is the wrong word here, because that would be true if they react immediately to the competition. Instead, not only do they have any strategic foresight, but they enter segments years after the competition!

A good example of this is the new Polo. I have seen the sixth-gen Polo abroad, and it is a fantastic car. If Hyundai had such a car, they would have been working on producing the Indian version of it, alongside the global development of that model. They would have launched it in India 6 months after global launch. But has Volkswagen done so, considering Polo is one of its most important models in India? No. Their reaction is, it is too expensive to make in India. Impossible. Cannot compromise German Engineering. Well then they would have to compromise on sales.

One a side-note: VW has accepted that MQB based Polo would be too expensive for India, so they are developing a new MQB A0 IN platform, cheaper platform for developing markets, which would underpin the next gen Indian Polo. But it will come 2020 and beyond, when the model is ready for a mid-life refresh

.

The irony of all of this is, Volkswagen had actually did it right the first time around with Skoda. It took a risk back then by coming to India not as Volkswagen and not with a cheap hatchback. They took the bold step of starting their Indian innings with an expensive sedan as their sole offering and by launching it with a brand-name which no one new. And they succeeded! How Skoda became synonymous with luxury, reliability and an upper-class brand in India is worth of being taught to marketing students. It is like Volvo buses in India. Even people who had never even seen a Skoda in tier-3 cities, knew about Skoda. The deference to this budget Czech brand in India was astounding. And then they threw it down into the toilet. But look at the strength of the Skoda brand. Even after the years of abuse, Skoda is still aspirational. Even with no next to no brand rebuilding, they are able to sell a decent number of Octavias and Kodiaqs.

They should have stuck with Skoda. They dream entry. A new brand which is accepted as a premium brand is what strategists dream about. Top-down approach is difficult, but if you can pull it off, just keep increasing volumes by introducing lower and lower models, feeding off your premium image. Look at OnePlus. Or Tesla.

I actually like the direction Skoda is heading now. They modern designs are different and smart, and premium. Volkswagen could try by removing the VW brand name for now, or reduce it to Beetle-esque cars. And start by coming with smaller Skoda SUVs, a premium hatchback, a cross-over and C-segment sedan. Just an idea!

[volkman10]

Originally Posted by avishar

Volkswagen could try by removing the VW brand name for now, or reduce it to Beetle-esque cars. And start by coming with smaller Skoda SUVs, a premium hatchback, a cross-over and C-segment sedan. Just an idea!

That is exactly ( most of it at-least) their new strategy. Would skip hatchback segments and go premium even in Sedan and S/CUV's.

Basically versions of VIRTUS and T CROSS (Skoda Vision X) are the cars in focus.

For a vision is 3% in the next five years - they are in a consolidation mode!

Priority is to focus on sedans and SUVs

two each for VW and Skoda – a compact SUV and a mid-size sedan starting 2020-21.

With regulatory uncertainty, it has decided to skip small cars in the immediate future

We can fight for meaningful share in SUVs and sedans, instead of being an also-ran in small cars

Link

[varunswnt]

With regulatory uncertainty, it has decided to skip small cars in the immediate future

What is this uncertainty that VW is more worried about. If they are referring to sub 4m cars then I don't see any slowdown by other brands nor I have read anywhere about it (correct me if I am wrong).

More than VW, Maruti-Suzuki would be the one most impacted if at all there is such regulatory uncertainty.