BackVolkswagen India to focus on strengthening sales
Sales have slipped 20% in the six months starting April, after growing 52% in the last fiscal
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New Delhi: Volkswagen India Pvt. Ltd, the Indian arm of the biggest European car maker, will focus more on strengthening its sales and service network and less on expanding market share at least until 2015.
Sales at the car maker, which sells automobiles including the Passat, Jetta, Vento and Polo in India, have slipped this year after growing 52% in the last fiscal. In the six months starting April, Volkswagen sales declined 20% to 30,476 units, according to the Society of Indian Automobile Manufacturers.
In the same period, Volkswagen’s market share declined to 2.38% from 3% at the end of the last fiscal. Between April and September, the passenger vehicle industry overall grew 7% to some 1.28 million units
Analysts attribute at least part of Volkswagen’s sales decline to the success of stronger models from rivals, including Maruti Suzuki India Ltd’s Swift, Dzire and Ertiga, and Hyundai Motor India Ltd’s new Fluidic Verna.
In an attempt to get its sales and service network right, Volkswagen India has hired Arvind Saxena as managing director. Prior to this assignment, Saxena was director (marketing and sales) at Hyundai Motor India—the country’s second largest car company by sales.
While Volkswagen has succeeded in establishing its brand in the India market since its entry in 2008, it has not worked on back-end systems to service large volumes, said Saxena. That’ll be its focus in the next two to three years, he said. After that, the company will focus on selling more, he said.
“So, if you ask me, in the next two-three years, we would like to grow at market rates and we would like to work around a 3% market share," Saxena added.
After its entry into India, Volkswagen’s Polo, along with Ford India Pvt. Ltd’s Figo and General Motors India Pvt. Ltd’s Beat, managed to dent the market share of companies such as Maruti and Tata Motors Ltd, but their sales slowed because of sales- and service-related issues, strong competition, and India’s slowing economic growth.
Saxena said the company may not be able to post any growth this fiscal.
“The point is if your volume grows from here and if you are fundamentally not organized to handle such a business, it will be disaster because customers may come and you may not be able to service those customers," he said.
Currently, Volkswagen has about 111 dealers and it wants to add another 24 by the end of 2013. Saxena said that in the near term, the company’s objective is to make its network customer-centric.
“The focus is on increasing that percentage of customers who buy our cars (and not just the footfalls in showrooms). So, ability to convert (footfalls into sales) and ability to make customers happy about your brand and service are most important and these could possibly be done now when volumes are reasonable."
An expert with a consulting firm said one reason for Volkswagen’s slowing sales in India was the greater focus of its headquarters on the China market.
“At Volkswagen, you don’t have a single volume product. Polo and Vento are niche products, which are positioned against stronger competition. It seems, for its headquarters, the focus continues to be on China," the expert said, speaking on the condition of anonymity as his company works with Volkswagen.
Saxena denied this and said the company’s headquarters continues to be optimistic about India although he agreed that the local operations need more attention.
“China has always been a strong market for Volkswagen. The focus on China is very different and India is different— (it’s a) very different market and it needs a very different treatment both from...the way we do business out here and also from the product side. It has to come in a coordinated scheme of things to make a bigger impact here," he said.
The expert cited above said that while Volkswagen would do well to strengthen its network, it also needs to be competitive on the cost front.
“What it needs in order to compete on the price front is an engine plant and a smaller car than Polo," he said. “The Indian car market is and will be primarily a small car market and no company can afford not to be present in that segment."
Saxena agreed.
“I think smaller cars or hatchbacks will drive growth for us. Even going forward, it will remain as a major segment. If you may look at it from a 10-year perspective, it may come down a bit but it will still be a major dominating part of the segment. If volumes remain there, then our volumes will also come from there."
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