Volkswagen to transform into an SUV brand in India market

“We will transform Volkswagen into an SUV brand in India," Steffen Knapp, director, Volkswagen Passenger Cars, a division of VW Group Sales India Pvt. Ltd said in an interview. Compact SUV sales continue to be one of the few bright sparks in India’s automobile industry witnessing one of the worst demand slumps in the past two decades.

Volkswagen, which entered India in 2001 with the Skoda brand and introduced the VW brand in 2007, has struggled to make a mark amid stiff competition from Japanese and Korean rivals. In FY19, VW’s wholesale dispatches stood at 34,859 units, accounting for only 1% of India’s passenger car market. Group company Skoda Auto’s market share was even less at 0.5%.

Knapp said that although VW India will continue to sell existing models such as the Polo hatchback, Ameo compact sedan and the Vento sedan, going forward, vehicles developed for India would be SUVs.

“We will continue to sell the existing cars here, will replace them time to time (with new face-lifts), but the additional products that we plan to bring will only be SUVs. That’s because I see this trend of rising demand for SUVs in the local market here. I believe that the SUV is the car for India more than any other country in the world," Knapp added.

VW’s India portfolio currently involves five cars, including three models made locally and two—Passat sedan and Tiguan SUV—imported as completely knocked down (CKD) kits. While Polo and Ameo see stiff competition in the small car segment, VW is absent in the growing compact and mid-size SUV categories.

VW Group last year said it will invest €1 billion for the development of new cars under the VW and Skoda brands. The company has merged its three Indian entities—Volkswagen India Pvt. Ltd, Volkswagen Group Sales India Pvt. Ltd and Skoda Auto India Pvt. Ltd—for greater synergies and faster decision-making. The merged entity, which is called Skoda Auto Volkswagen India Pvt. Ltd, will develop six cars for domestic and export markets.

Under the new strategy, VW India’s first product will be a compact SUV based on its MQB-A0 platform, and is expected to be showcased at the upcoming Delhi Auto Expo early next year. Two persons involved in the project said on condition of anonymity that the VW Group aims to compete with segment leaders such as the Hyundai Creta and the Mahindra XUV500 with its new SUVs.

Besides, there is another undisclosed model in the works, with both cars to be retailed under VW and Skoda brands, and will also include their left hand drive variants for the export markets.

“We are not going to look at the small cars or the B segment sedan type categories anymore unless there is a strong business case for them in the future," Knapp said.

Puneet Gupta, director, automotive forecast, IHS Markit said, “SUVs continue to see strong demand as their share in light vehicle sales has increased from 9% to 24% between CY2010 to CY2018. Meanwhile, the share of hatchbacks has reduced from 45% to 36% during the same period."

Gupta credits SUV’s aspirational body type, robust design and multi-utility applications behind their rising demand. “The emergence of SUVs is due to multiple product launches by all major carmakers. It is also seen especially in the urban markets that compact sedan and hatchback category customers in their natural progression are upgrading to SUVs. Also, we are seeing that the vehicle manufacturers are able to roll out multiple variants of SUVs, thus targeting a much wider audience, latest example is Kia Seltos."