At Volkswagen India, it’s process-refresh time

Volkswagen might not have had a great 2012, but the German manufacturer is working towards nearly doubling market share over the next five years by harmonising salesprocesses. Arvind Saxena, managing director, Volkswagen Passenger Cars, spoke to Raj Nambisan and Yuga Chaudhari about the company’s strategy. Edited excerpts:

Has there been a shift in consumer sentiment since the change in diesel policy?
There has been a perceptible shift towards petrol cars since November and as we as we go forward, if there are more hikes in diesel prices, this will get more pronounced. But people would still buy diesel vehicles — but they will take a rational rather than impulsive decision. Today, they buy even if their usage is just 1,000 km a month — which is a waste of money.

What are the triggers that can change the game for automakers?
The car market is all about positive sentiment. When people feel secure for the next 3-4 years, that’s when people buy cars and houses. That’s not the case now, the general feeling is of caution.

How will the diesel policy change affect your plans?
It will surely impact not just us, but any player making investment. The automobile industry needs long gestation periods. Every company here has made major investments, so we need more stability in policy, that’s the crucial point.

2012 was not very good for Volkswagen…
It could have been better and 2013 in general does not look as a great year either. Fundamentally nothing has changed that should really prop up sales. If interest rates go down by 25 or 50 basis points, it doesn’t change anything overnight, though sentiment will surely improve.

What about this year?
Volkswagen has almost concluded the first phase of its India entry. The problem is, people expect us to do wonders every year. Our 4-5 years in the market is compared with 15 years of others, which is not the right way to go about it. We have ramped up our business very rapidly. In four years, we are about 70,000 units in sales through 110 dealers. I don’t think anybody would have expanded business like this. So, if you are ramping up so rapidly, there comes a time for stabilising, consolidating, and taking the company to the next league.

So, have you stabilised?
We are in the process. We are reworking business processes - internally and for the network. I think that is what would give us a long-term stability. We cannot grow at breakneck speed all the time on the back of new models. It may take another 3-4 months, by which time we should be able to be in a better position to service customers, which should give us the edge over others.

Did you restructure the whole sales set-up?
We have. More importantly, due processes have been drilled down to the last person.

What were the key things that you had to change after joining Volkswagen?
The processes. The human assets are already here. What I am trying to do is bring everybody on board to think in one direction. Each one of us will have to contribute. So, we had a couple of meetings to communicate on how we want to do business as a group. Today, we are at a level where we understand each other.

Was it a flaw about the Teutonic way of functioning and you had to customise or Indianise systems?
Not at all. The German way of thinking works worldwide. The point is, each country has its uniqueness. Not very different, but it’s about nuances. That needed to be recognised.

What about your sales network?
Since volumes are not growing as fast as we want, we do not have an aggressive network widening plan as of now. We have about 110 dealerships and we might add about 11-12. Whatever we have it should be good enough for the next few years. We will rethink when we decide to ramp up the volume.

When will you ramp up the volumes?
I can’t say, but right now we definitely hope that from the current level of market share of 3% we would grow to 5-6%. It could be by 2018.

There is a perception that Volkswagen is facing model fatigue. There’s been nothing new on offer in the volume segments for some time now, other than refreshes…
That’s not the case. Our refreshes have created a fair amount of excitement. And for next two years, we have plans for special editions, car line extenders … so there could be more technology, features and many other things.

After the festive high, is it hangover time for sales now?
January starts a bit late. The first two weeks are suppose to be inauspicious as per our Indian calendar. But that’s how the market is. Buying habits cannot be changed. Generally, January starts after Makar Sankranti (January 14). If we compare with December, it is slow. No doubt. Across the industry.

What about rolling out completely new products?
I can’t answer that. But yes, if I have to grow market share we need to get into in other segments.

Are compact SUVs the way to go for Volkswagen too?
That’s an interesting segment, it has grown very well in recent times. But you also have to examine the growth with the new correction in terms of diesel prices. SUVs really rode on that fuel price differential. Going forward, if the gap narrows, then it will make a difference. It would, I think, shift the balance a little bit. But the segment is still very relevant to India, it’s interesting.

What is the volume target for this year?
More than volume, we would look at market share and we are working on at least 3%. But yes, we are looking at a moderate growth this year.