Audi India has been the fastest to achieve pole position in the Indian luxury car market, since its 2007 debut. Last year, though, it lost the coveted spot to Mercedes-Benz. Audi India Head Joe King shares with Chanchal Pal Chauhan key issues, driving the Indian luxury space and new challenges. Edited excerpts…
BT: In your two-year stint, the Indian market has been on a gradual evolving phase. Right from the ban on diesel cars (2,000cc+) in Delhi-NCR, to the advancing of emission norms, to the freshly imposed infrastructure cess on new vehicles. How does Audi India see these uncertainties and your strategy to deal with it?
Joe King: I have always thought that being a professional golfer would have been a wonderful career for me - a game in which you predominantly challenge yourself. However, my stint in India is allowing me to experience just this. There is uncertainty and ambiguity for the luxury car market - not only just for manufacturers but also for dealers and customers.
I think situations like these are when the sportsperson in me comes out. Each uncertainty and challenge for me is an opportunity to do better. The idea is to 'play well' and if you do this, the chances of you winning increases. The key is to analyse the issue in its entirety and respond in the most appropriate manner, keeping the long-term strategy in perspective.
The Indian customer knows what he wants and is highly aspirational. You need to have the best products, network; at the same time, you need to have a really strong customer connect. It's a marathon, not a sprint. You need a strong brand, a strong presence in the market, and a close customer connection, as well as a strong business model. We have all of this in place and that is the key to handle not only the dips, but the huge upswings in the market as well.
BT: In the given scenario, how would you beat rising tax incidence on cars? It could be through a localisation drive to keep Audi competitive and attractive for the Indian customer…
King: It is indeed disappointing that the industry's demand on reducing excise duty has not been addressed, and additional taxes like infrastructure cess will further affect the price and, consequently, the demand.
The luxury segment in India will grow. It is still very young in comparison to other markets. Currently, it is a little over 1 per cent of the total market. In established markets, it is in the range of 10-15 per cent, so there is undoubtedly huge potential. Although it is not sustainable to force this growth, the vital aspect is to maintain strong fundamentals to ensure you can maximise the return when the market grows. We have currently a very strong market share, one of the highest in the world. This means anyone considering a luxury vehicle will consider us.
With regards to localisation, of the total volumes sold in India in 2015, more than 95 per cent of the cars were built locally. The Audi A3 sedan, Audi A4, Audi A6, Audi Q3, Audi Q5 and Audi Q7 are the models already being produced locally in India.
The Indian market is very much at the forefront of Audi AG's thinking. The important thing is that the foundations are in place to handle the dynamics of an emerging market. We already have a significant capacity currently with 14,000 units per annum on a single shift.
Last year, VW Group already announced substantial investments in engine assembly plant. The 2.0 TDI engine assembled there will also include substantial units for Audi. It's a part of our strength of being in a group.
BT: How would the new provisions in the budget impact Audi's long-term strategies and plans for a strong footing in the Indian passenger car market?
King: Although the new provisions in the Union Budget this year are disappointing in the short term as we would like to see the next phase of growth, we understand that the government's fiscal policy requires significant investments in areas such as infrastructure. Whilst having a short-term impact, this will benefit India as a whole in the longer term and, therefore, we should be able to see growth in the luxury segment in the future from which we will benefit substantially with our strong fundamentals in place.
Audi India has consistently performed and recorded growth over the years; in spite of fluctuating market conditions. The budgetary proposals have no doubt dampened the spirit of the luxury car market. However, we believe that we have the most comprehensive range, which offers fantastic value. Audi's performance continues to be robust in the Indian market. It is a marathon and not a sprint. We are consolidating on our strengths while maintaining a profitable rate of growth.
BT: Audi has been consistently growing since its debut. What has been the recipe of success even though market conditions have been tough?
King: We started our journey by setting up our own sales company in March 2007 and have ever since charted fast-paced, consistent growth in the country. We raced past competitors who had entered the country much earlier and became the first luxury car brand to achieve sales of more than 10,000 units in a year in 2014. We have continued our growth momentum with an impressive 11,192 deliveries to customers in 2015, marking the eighth successive year of growth for the company and reinforcing the brand's consistent performance since its entry in India.
I have always maintained that for the Indian market, the strategy has to be right and ours has been on track. We will continue to follow this strategy: having the right product mix; progressive strong connection with the customer; highly professional and quality dealer network; and well-trained personnel for customer service.
Leadership for us has never been just about sales volumes; it's about having good quality service, customer interaction and a strong brand pull, and Audi has excelled at all of this. We brought several cutting-edge products; many first in their respective segments like compact luxury SUV - Audi Q3 quattro (all-wheel drive) in 2012, the first compact luxury sedan in India - Audi A3 Sedan in 2014 (the market until then had only compact luxury hatchbacks), India's first compact luxury open top convertible - Audi A3 Cabriolet in 2014, and India's first super sportscar with an Avant body type - Audi RS 6 Avant in 2015 among many others.
The product offensive has been supported with our effective marketing strategy that consistently communicates the brand values - sporty, progressive and sophisticated. We have several customer engagement initiatives that facilitate one-on-one interaction, which is most crucial if one has to turn the customers into fans.
We introduced the Audi Club India, a first of its kind in the luxury automotive space through which exclusive members enjoy several benefits with priority access to coveted national and international Audi events. Exclusive driving experience programmes like the Audi Q Drive, Audi Sportscar experience, Audi Women's Power Drive, Audi Multicity experience and other Sports & fashion events properties in India like the Audi Autumn Collection, Audi Quattro cup, Audi Football Summit and Audi Art Experience have been key platforms to interact with the customers and receive valuable feedback.
Our new initiative Audi Mobile Terminal (AMT), which brings the showroom right to the customer's doorstep especially in tier II and tier III cities, received a huge positive response from the customers. AMT has already visited customers across cities like Jodhpur, Kota, Ambala, Hisar, Muzaffarnagar, Saharanpur, Meerut, Moradabad, Aligarh, Agra and Amritsar last year and had received exciting response. We are also taking up a new initiative of setting up service centres at places where it does not have a showroom but already have a lot of customers, as a part of our long-term strategy to fuel growth in India.
On the service front, too, we have taken pioneering initiatives like inaugurating the Audi Technical Service Centre in Mumbai in 2015, which has helped us tremendously in after-sales service in the market. We also initiated the Technical Apprenticeship Programme (TAP) in collaboration with three training institutes in India. TAP is a comprehensive manpower development program in India with a vision of creating quality talent. TAP is specific to Audi Syllabus and is designed to generate a ready pool of industry ready professionals. Through this initiative, Audi India would offer training and technical support to the institutes, thereby enhancing its students' employability in the automobile sector.
BT: What's your strategy on the diesel that is turning out to be a devil now?
King: Short-term decisions lead to increased uncertainty and ambiguity for the future not just for manufacturers but also for dealers and customers. As manufacturers, we need clarity on policy direction so that we can amend our strategy in line with the customer demand. The need of the hour is a multi-pronged 360 degree cohesive approach, which looks at the entire environmental issue holistically, without affecting the business environment.
We do have petrol engines available on majority of our models & we are adjusting the engine mix to meet the Petrol Demand, which includes higher allocation of Petrol to Delhi-NCR market. We also welcome the move towards BSVI provided we have the adequate fuel quality to implement this.