VW to drive first EV into India next year
3 min read . Updated: 10 Jun 2022, 06:13 AM IST
Premium- This would be the Volkswagen brand's first electric vehicle offering in India, where it currently has an entirely new, albeit small, portfolio of three IC-engine cars, including the mid-sized Sedan Virtus, launched on Thursday
Volkswagen India, the local unit of the German carmaker Volkswagen Group, is looking to bring "limited volumes" of its compact electric SUV ID.4 to the country next year, a senior company executive told Mint.
This would be the Volkswagen brand's first electric vehicle offering in India, where it currently has an entirely new, albeit small, portfolio of three IC-engine cars, including the mid-sized sedan Virtus, launched on Thursday. This is Volkswagen's second and final product introduced as part of the Group's €1 billion India 2.0 project.
“We are looking to get the ID.4 into the country in August to begin testing it in India, in terms of the technology, the ecosystem and what internal preparations we need to make to bring the car into the country. Once this testing phase is over, my target is to bring in limited volumes of the top-spec variant of the ID4 into the country next year. This will be step one," Ashish Gupta, brand director, Volkswagen India, told Mint in an interview.
Gupta added, “We have a global portfolio of EVs but it is a question of having a wider plan around introducing an EV in the country. We are formulating a three-step plan where we first bring in some fully built-up units (FBUs), then going in for local assembly through the parts and components route, and then full localisation. This whole plan is still under formulation."
The move will be in-line with the strategy some other global OEMs such as Kia India (the EV6) & Hyundai Motor India (the Kona) have followed by importing limited volumes of BEVs sold in other countries, to test the market sentiment and be an early mover in the transition to clean mobility that the Indian automotive sector is witnessing.
However, Gupta believes mass adoption in EVs in India is three-four years out as of now.
"Mass electrification in India I think is still three to four years away. I see it only happening around 2025-26 because for mass localization, you need a manufacturing base, a supplier base & achieve price points for mass electrification to make sense. In the meantime, one must build capabilities internally & see how the market is responding," Gupta said.
"Sedan opportunity a blind spot, love for sedans has not gone away from India."
Volkswagen's latest product for India, the Virtus, is a premium mid-sized sedan: a market size of about 95000 cars last year (out of total car volumes of just over 3 million). Gupta expects the Virtus & VW's sister brand Skoda's Slavia to expand this market to 140,000-150,000 units this year.
What gives Volkswagen India the confidence of building a successful business out of selling a Sedan in a market where the growth segment is SUVs?
“You have to look at the segment closely. The growth in SUVs has come entirely at the expense of hatchbacks, not sedans. Sedans have continued to enjoy a fairly stable 11-12% market share. Even as brands focus on growth segments like SUV, sedans have become a blind spot. Demand for sedans is coming from additional purchases in households which already have one car - if that is an SUV, customers want to opt for a differentiated bodystyle - a sedan. We see many customers wanting to buy a fully-loaded European Sedan such as the Virtus," Gupta shared.
Volkswagen is targeting a significant chunk of this segment, currently dominated by Honda City & the Skoda Slavia.
"We are targeting a 15%-20% share of the premium mid-sedan market, which would translate to a monthly sales volume of 2500-3000 cars", Gupta said. Moreover, he doesn't expect the Virtus to compete with the Slavia -- "The Slavia did not take away from Honda City sales, but added to the market and became bigger than the competition. That's what the Virtus will also do," he added.
Volkswagen India registered 4000 bookings for the Virtus in the last two weeks. Gupta expects to be able to service demand for customers who have pre-booked the car for June & July, but remains cautious about the supply chain going forward.
"The situation continues to be tight. There is a 30%-40% shortage in semi-conductors and components compared to what we need, as is the case with the rest of the industry," Gupta told Mint.
Volkswagen is gunning for a 3% share of India's passenger car market by the year 2025, and along with Skoda, the Group is targeting a 5% share of the country's PV market in the next three years.
