Volkswagen to develop a very sophisticated car line in India: Steffen Knapp

Steffen Knapp has been director of passenger cars at Volkswagen India Private Ltd since June 2017, when he was brought to revive the fortunes of the company in the country. Since, Knapp has been preparing his company for its India 2.0 project, which will see over Rs 8,000 crore of investment pouring into the world's fastest growing car market. In an interview with Shahkar Abidi, Knapp talks about various aspects of Volkswagen's past problems and his plans for India.

What are the five major issues you think were not appropriately addressed at Volkswagen India before you took over, and what have you done to correct it?

The first and the essential one is to have a clear strategy. So you need to have a plan if you want to go to the next level. So what did we do? We got our own Volkwagen plan. So that includes the brand positioning and priorities that we as an organisation work for, and that obviously includes financing this plan. This was the first thing that was most important for me. You need to have a plan for India, you need to have an objective, mission and how you need to achieve this objective. I don't have masses of people. I have only 100 people working with me at the headquarters (Mumbai) plus around 5,000-6,000 people in the network. I need to focus on the organisation; there is so much to do. But we have six strategic priorities. So we are day to day asking ourselves, are we doing something which is preventing us from reaching our plan. So the first thing we did was to have a plan.

Please carry on..

The second thing was to reach out to our vision which we need to have about our products and goods. Things about this announcement in July, that is an investment of €1 billion, is set. That was hard work because you know that India is a very challenging market in terms of business, people are very demanding. So that makes a proper business case for us as a company. We are very strict in cost and very, very focused on how we do it. To be in the right product segment which are growing and which also gives you the right ticket size. The third thing is you saw that the objective was missing. The position was not filled since April. I came in August. So four months of was a little bit of disruptive period. We had to change profiles, we had to allocate more resources in some departments. So that is exactly what we did. We reorganised ourselves and that is now done. New people in the HOD functions that was the first thing. The second thing is that we allocated, for example, more resources for digital. We changed our network strategy and there are a lot of things which we relate to the team.

So the team is in place, that is number four and the fifth one which I think is also very important is the relationship with our partners (retailers). We invested a lot of energy and time in getting a very open and transparent way we can speak with our partners. We are very small, our brand is not very big in India, and therefore you have a chance to create a network machinery.

So these are the things that were missing earlier?

From my point of view, yes. We had no clear strategy. We had not defined the product portfolio for the future. It was not there. There was this discussion with Tata to co-operate. This was stopped and so on. We now come in 2018, we have the product portfolio set up, we have the finances set up. We have the restructuring done under the leadership of Skoda, which is a way we can have much more localisation possibility, much more possibility of looking at Indian needs. Influences from headquarters are less. It is decentralisation.

How has been your experience so far in reaching your goal plans in India?

Professionally, it has been a very tough year (2018) as we changed a lot, and the good thing is that we have seen the result out of it. So we have announced the India 2.0 project, for which Rs 8,000 crore is the investment, which is a lot of money. When you look back, the first three months were about understanding the people, network and investment. The second is we worked on the plan, defined the framework, vision, mission and then our priorities, and that was all settled. We announced it to our network at the end of 2017 and now its about relentlessly implementing it. So 2018 beginning was to get the financial resources for it, and obviously for everybody to get up to spread what then plan is all about. I think, the organisation knows it now what it wants to do. It is very important to get it communicated to all the levels of organisation as they know where the Board is going, what are the direction, what are we going to focus on.

What new products is Volkswagen India planning to launch in the next five years?

Recently, Volkswagen Group announced the India 2.0 project, which will include setting up of our globally renowned MQB platform that suit Indian requirements. Through this project, we will be launching two new products starting 2020. A first will be A0 SUV that is currently not in our Indian portfolio. Further, we shall emphasise on developing a sophisticated car line that continues to offer a value-for-money proposition. We will focus on localisation by tweaking few child parts as it is called. For instance, our side view mirrors can withstand a speed of 200 kmph. However, in India no where you can drive up to that speed apart from race tracks. Therefore, such Volkswagen standards will be modified to suit Indian needs.

There is a growing trend world over of people moving away from possession based ownership to usage based one. Will you be moving it in that direction as part of India 2.0?

India is still not there. Sales are still done predominantly by first-time buyers. They are looking for mobility. However, I have a belief that the future will be more usage based, particularly in big cities. For instance, you see in Mumbai car sales went down this year by 9%. So people are getting into mobility.

That means at present your focus will not at all be on usage based?

No. We are also preparing ourselves for the usage based. We are working with VW Financial Services, so that people can just use the car while the property remains with the bank. Further, leasing in India is still very much unstructured and leasing companies are not very big here. In a country like the UK, for instance, about 70% is leased. Young people don't want to own it anymore. Secondly, you have an unstructured used car market which makes it difficult for leasing companies to sell these cars because you have a different market situation in Tamil Nadu (where) my residual value is 5% better than in Delhi. So that makes it very, very difficult.

The not-so-positive perception is still a problem for the Volkswagen brand, especially in the after-sales services. What are you doing to change that?

Volkswagen has been dedicatedly working towards improving its market perception on after-sales services. We're working on a 360-degree approach, starting with a mandatory presence of a master technician at all our dealerships. Secondly, we're working towards completely digitising our sales and after-sales initiatives. Lastly, we're working towards improving our target cost-of-ownership.