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After close to two decades in India, Volkswagen—which means ‘people’s car’ in German—has been unable to live up to its name. Can a billion-euro India 2.0 project change that?
By: Prerna Lidhoo
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For a company whose name means ‘people’s car’ in German, it’s ironic that Volkswagen (VW) has failed to capture a meaningful part of the world’s fourth-largest auto market, let alone the popular imagination, in two decades.

Ranjan Rao’s experience with his recently purchased Taigun encapsulates just why. Rao got the SUV (sports utility vehicle) without the accessory pack, number plates and even floor mats, and four visits to the dealership later, the problem persists. “When you’re paying Rs 22 lakh, you expect a better service experience. It feels like I’ve bought a second-hand car. If someone asks me if VW is a good option, what will I say?” he asks.

And this from someone who was an engineer at Bosch for nearly six years and has an unshakeable faith in German workmanship. “I went for it because it’s a compelling product. The fit and finish, and safety of VW cars are a class apart,” he reasons. “But premium-ness comes from the overall experience and not the brand itself.”

Everyone from customers like Rao to dealers to industry experts concur that VW cars are well-engineered, but they also echo the same complaints about the German automaker’s poor customer experience and after-sales service. That’s one reason for the group’s meagre market share, worth 2.2 per cent across its five brands—Škoda, Volkswagen, Audi, Porsche and Lamborghini—according to the Federation of Automobile Dealers Association (FADA). In contrast, Kia Motors outsells them by nearly double and has a 4 per cent market share despite entering India just three years ago. Hyundai Motor, which started four years before Škoda, is India’s second-biggest carmaker, with a 13.6 per cent market share.

The other misstep was an identity crisis. The VW group entered India with Škoda in 2001, positioning it as a premium brand competing with the likes of Toyota, although it was among the cheaper brands in Europe. But the brand positioning went haywire in 2007 with the entry of Volkswagen, a true-blue premium brand. Moreover, the stable’s cars also cost more than a rival’s options—for example, the top-selling Taigun costs between `10.99-17.99 lakh (ex-showroom, Delhi) while Kia’s Seltos (which has more features) costs Rs 9.95-18.19 lakh and Maruti’s S-Cross costs Rs 8.80-12.77 lakh. That’s not just due to the premium placement but also because the group imports cars, which inflates both the sticker price and after-sales expenses, increasing the total cost of ownership. Perhaps that’s why it never racked up the volumes to capture significant market share—it isn’t even No.1 in the premium segment. Plus, its sales and service centres count is far lower than rivals.

“Some companies come to India just to be present in a big market. They don’t have the right strategy. It’s a clear case of expectation mismanagement from a dealers’ perspective. They need to make for India and not just shift their global portfolio here,” says Vinkesh Gulati, President, FADA.

And VW plans to do just that with the India 2.0 project. In late 2019, it announced a massive structural and operational overhaul worth €1 billion, one of the biggest investments in the Indian auto sector. The group merged its three units—Volkswagen India, Volkswagen Group Sales India and Škoda Auto India—into one entity called Škoda Auto Volkswagen India to streamline decision-making. In came the successful MQB platform to manufacture cars locally, reducing retail prices. In conjunction, some 200-250 engineers are in the process of getting hired. The new company—which oversees business operations of all five brands which operate as separate brands in India—will also invest in boosting the capacity at its two plants in Aurangabad and Pune, as well as its network of sales and service centres across the country.

 “All the actions that we’re taking on the sales front will mean that the brand will be amongst the top 10 markets for Škoda Auto and will also be in the top 10 OEMs in India, which will be a tremendous feat,” says Zac Hollis, Brand Director, Škoda Auto India. “India is now becoming a part of Škoda’s overall growth strategy. We want to become a value luxury brand.”

The project got off to a strong start, with recent SUV launches helping the new company’s sales surge 50 per cent year-on-year to 41,034 cars in 2021. The aim is to double sales this year, helped by more than 18 launches. The ultimate proof of success will be if the company achieves its target of a 5 per cent market share by 2025.



While the new Taigun and Tiguan SUVs have helped VW’s sales recently, dealers say the numbers would have been better if they were 7-10 per cent cheaper. Plus the cars comfortably seat only four people, instead of five—a potential deal-breaker in the SUV-crazy Indian market.

Moreover, despite the popularity of hatchbacks and SUVs, VW continues to bet on sedans such as the Slavia, slated to be launched soon. “The sedan segment is not something which has completely gone out. Sedans still constitute 12-15 per cent of the market. It’s still a body style loved by Indians and the segment itself is devoid of too many options,” says Ashish Gupta, Brand Director, Volkswagen India.

The sedan segment is not something which has completely gone out. Sedans still constitute 12-15 per cent of the market. It’s still a body style loved by Indians and the segment itself is devoid of too many options.

Ashish Gupta
Brand Director
Volkswagen India

He’s not wrong. For example, the premium-level Škoda Superb and executive-level Škoda Octavia are both segment leaders, cornering a quarter and a third of the market, respectively. “Our product portfolio is now very fresh in the Indian market. When we bring our new sedan based on the MQB platform, it will be a segment-defining product. I’m quite confident we’ll end up growing the segment,” Gupta says.

Experts, however, are doubtful. “They’re always late to the party. Globally, the MQB platform was launched around 2014 and it’s coming to India in 2021. It’s a seven-year lag, which clearly shows India wasn’t a focus for the company till now,” says an auto expert who spoke on the condition of anonymity. “The Indian market is tough to crack but not that tough that it takes 20 years to figure out.”

In that same vein, while carmakers like Hyundai, Tata Motors and MG Motor are betting big on electric vehicles (EVs), both Škoda and VW confirmed their EV portfolio won’t hit Indian shores before 2025. “The EV market, especially in passenger cars, is less than 0.5 per cent. But the good thing is that it’s doubling every year. By 2025-26, the electric segment will be 5-8 per cent of the market. That is an interesting point where you can actually think of bringing in your global portfolio or an electric car customised for India,” Gupta says.

Instead, the group’s current EV line-up in India comprises cars from the super-luxury segment—Porsche and Audi. In fairness though, EVs have helped Audi India double its sales to 3,293 cars in 2021, their best growth since 2008. It is the only luxury brand to have five EVs on offer in India, a strong head start. But meaningful volumes come from hatchbacks and SUVs.



Some of the group’s most successful cars were Škoda’s Octavia, Fabia and Yeti—all hatchbacks or compact SUVs. But, because they were imported, they couldn’t get a foothold in a cost-competitive market. As a result, these family cars were discontinued as were VW’s Beetle and Jetta.

This is an issue the company is looking to address in part with the MQB platform, which is highly localised to achieve cost competitiveness. “The group made sure the platform that we bring into India lends itself to customisation to different body styles and is suited to a higher degree of localisation,” says Gupta. Indeed, Škoda has hit 95 per cent localisation with the Slavia, from around 64 per cent in 2018. That’s comparable with rivals. Market leader Maruti Suzuki has more than 95 per cent localisation, while Kia and Tata Motors top 90 per cent. Volkswagen India, though, is at around 82 per cent.

Škoda Auto Volkswagen India is also focussing heavily on growing its network of dealers and service centres as well as shrinking its cost of ownership—pain points it is acutely aware of. “We’ve been reducing our costs and have really moved the needle in terms of customer satisfaction. Many people tell us Škoda makes great cars but they don’t have a dealer or a service centre close to us, the cost of ownership is too high, etc. This is something that we’ve been trying to change,” Hollis says.

Škoda currently has 175 centres in 117 cities, 50 per cent more than a year back, and plans to take it to 225 across over 140 cities. Volkswagen India has 140 centres. Those counts, though, are less than rivals’. Kia, for example, has 339 touch points, while MG Motor India has 245. FADA’s Gulati suggests clubbing the Škoda and Volkswagen showrooms to optimise sales, make it viable for dealers, and save money in the process.

Then there’s the cost of ownership. “VW has one of the most robust products in the Indian market. Now they need to break the taboo to show their service and after-sales costs are affordable,” says Gaurav Vangaal, an Indian auto market analyst at IHS Markit.

VW has one of the most robust products in the Indian market. Now they need to break the taboo to show their service and after-sales costs are affordable.

Gaurav Vangaal
Auto Market Analyst
IHS Markit

This is where the company’s “child parts” strategy is key. The idea is that rather than replacing an entire module or assembly in case of damage, one could just switch out the affected parts, which is faster and cheaper. The group also has three parts distribution centres, improving availability and speeding up delivery. It aims to reduce the cost of spare parts by 3-13 per cent, which will go a long way in reducing the total cost of ownership. It has already cut engine oil prices by 32 per cent and overall maintenance costs by 21 per cent.

In fact, the company has slashed the overall cost of ownership of its cars by 20-25 per cent in the last two years, claims Gupta. And that will continue.



While the India 2.0 project is on track, Gurpratap Boparai, who used to lead it, has moved on. Boparai joined Škoda in mid-2018 and was the first MD of Škoda Auto Volkswagen India. He helmed the tripartite merger, guided the company through the Covid-19 pandemic and oversaw two successful launches—the Škoda Kushaq and VW Taigun. But Boparai quit abruptly in December 2021. Though the reason for his departure isn’t clear, dealers blame “quality and compliance issues”.

This is an example of the managerial headaches the company has to overcome. “There’s a huge leadership crisis in VW India,” says the industry expert quoted earlier. “They stay for a couple of years and then leave. They need to be more consistent in the Indian market. The German way won’t work in India, they have to do it the Indian way.” VW recently appointed Piyush Arora as Boparai’s successor. He takes charge on March 1.

As part of the change, some experts suggest the company should move its base from Pune to Delhi, to keep its ears closer to the ground and better understand market trends. After all, it cannot afford to get this reboot wrong. “We took a big bet,” says Gupta. “Despite the challenges in the last two years, we stuck to the timelines of launching our cars and bringing them at competitive price points. So far, customers have seen three products from the India 2.0 project and it’s been fairly successful.”

However, experts are still wary that despite burning a billion euros on the Indian market, the German carmaker may suffer the fate of its US rivals Ford and General Motors, which have all but exited the market. “With VW, it seems like the global management has no faith in the Indian management and production system. The ‘India’ part is missing from the India 2.0 project,” says an industry veteran who spoke on condition of anonymity.

Others, though, believe the VW stable has tremendous potential and won’t quit India just yet. In fact, when asked on Twitter, Hollis curtly replied, “Why would we invest `8,000 crore into India over the last three years if we were thinking of leaving the market? We plan a long-term future in India with more new products to come.”

That’s good news for the thousands of devotees of the German brand in the country, like Rao. “I’m crazily biased towards German engineering and want to see them succeed,” he says. Until then, it’s a long road before Volkswagen lives up to its name and truly becomes the ‘people’s car’ in India. New MD Arora has his task cut out.


Story: Prerna Lidhoo
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