Mumbai: With the government raising customs duty on pre-assembled engines, gearboxes and transmission for luxury cars, Audi India may use its parent Volkswagen Group’s local facilities to manufacture engines, Michael Perschke, head of India, said in an interview on the sidelines of the Mint Luxury Conference in Mumbai. Perschke said Audi, currently the third largest manufacturer in India’s luxury car market, is aiming for long-term growth and is confident of becoming the market leader by 2015. Edited excerpts:
The government has increased customs duty on pre-assembled engines, gearbox and transmission for luxury cars. What will your strategy be? Will you increase prices or set up infrastructure to manufacture engines in India?
It is too premature to make a statement as the notification just came out a few days ago. We are looking at it and studying it; there are still some consultations going on as we need much more clarity. The pure legal paper leaves a lot of room for interpretation, so we are studying it right now. We, as the Volkswagen Group, have a lot of capabilities today. We have a plant in Aurangabad, we have a huge plant in Pune where we do engine and gearbox manufacturing, so I think we have all options open. But first we need more clarity, what it concretely means, and once we have that, it is not too difficult for us to make the decision.
Audi is at No. 3, right behind Mercedes and BMW. What will Audi’s strategy be to gain ground in India?
First, we look at India as a long-term race. It’s not about months or weeks, it’s about a long-term objective. We’re very confident that in 2015 we will be No. 1. We’re No. 1 in Europe, we’re No. 1 in China, we are the fastest growing brand in the US. We are today the fastest growing luxury brand in India. We have increased our market share from slightly more than 20% in 2010 to already 25% in the last two months. This year we will definitely go bumper to bumper with one of the two key competitors we have. And like an endurance race when you go 24 hours, the race is won not in the first few hours, but in the last few hours. We have to make sure that we get the right tyres on, make the right pits stops and make sure we have no technical failure. This year already, it’s going to be tough competition for No. 2.
What will this growth be based on?
Our growth is based on four to five key pillars. The first is that we are a product company, it is our essence to have the best products in the market. This year, we have several new products—the A8 which we launched in January, we have the A7 coming in May and the A6 coming in September-October, these are three big volume products. Then we have the R8 V10, we have the R8 Spyder which we launched at the Luxury conference here in Mumbai. We also have the highest quality dealer network today, and our facilities are benchmarked in the industry and competitors are constantly visiting our facilities. The third pillar is after sales services and financing, insurance products.
The other pillar is the brand. Today we are an aspirational brand among the younger crowd, especially younger achievers, people who are starting their own companies or taking over from their fathers and taking it to the next level, people who come in from the US or the UK who are exposed (to) our brand. Of course, the core basics are our people and talent, who reach out to the customers at our dealership and we will continue to invest in training and recognition programmes. These are strategic pillars. We’re not too aggressive, because India is a market that you grow on substance. It’s not a hit and runaway success market; you have to invest and clearly prove that you are a long-term player in the market.
How keen is Audi on non-metro cities?
It is definitely one of the key pillars of our network strategy. We have put our footprint into Delhi, Gurgaon, Mumbai, Bangalore, Chennai, Hyderadad, Kolkata—the obvious cities. We are now stepping into (smaller) cities and we did that successfully, cities such as Jaipur where from third month onwards we’ve been market leaders because we look for what we call local heroes—people with a high connect in society. We’re putting our footprint into Chandigarh, opening in Ludhiana in April, also opening in Surat. So, tier II cities are definitely part of our strategy and if we have the right products, we may even venture out into cities with one million inhabitants or one-and-a-half million inhabitants. So today we are already in Kochi, and will be in markets such as Bhubaneswar, Vizag, Coimbatore, these are cities you have to have on your radar.
BMW has launched the X1 which is competitively priced at Rs 22 lakh, and has helped push up volumes for the brand. Is Audi looking to launch a product in that price bracket?
Obviously, you can’t neglect (it). Globally, it (BMW) is one of our key competitors. We have a product coming into the Europe called the Q3, you could also called it the baby Q7. So it will be launched in Europe in the later part of this year. Within the first half of 2012, it will come to India, it’s a baby Q7 so you can expect everything that is available from Audi, including a quattro drive, a real SUV (sports utility vehicle) from a look and feel perspective. And we will definitely compete in a segment where our competitor is already in today. But it will have the real Audi DNA.
How big is the market for luxury cars in India?
Last year, barely 0.7% of the total car market in India was luxury. Considering the key brands in the space and that everything over Rs 20-22 lakh is luxury. This year we will look at a total car market of 2.5 million (units). If there are no more drastic changes coming in, we would look at a market of 0.8% or 0.9% being luxury, so approximately 23,000-24,000 cars, which brings the market to a growth of about 45-50% minimum. We want to grow as fast as the market or even faster. So (in) long term we think the total Indian car market will go beyond 5 million (units), the luxury market will probably hit by that time 100,000 cars and we definitely want to have at least 25-27% of it.