Volkswagen aims to garner over 60% revenue from SUVs in the next 5 years

Volkswagen India said it will launch four Sports Utility Vehicles (SUV) in the next two years, betting on a segment that is expected to garner over 60 per cent of the auto-maker’s revenue in five years, a top executive has said.

On Friday, Volkswagen India launched its SUV Tiguan Allspace. Currently, SUVs contribute less than 5 per cent to the company’s sales.

Prior to the launch of Tiguan Allspace — which is sold at a starting price of ₹33.12 lakh — Volkswagen only had one SUV model in its Indian stable. Globally, over 42 per cent of the German auto major’s sales come from SUVs.

Speaking to BusinessLine on the sidelines of the launch of Tiguan Allspace, Steffen Knapp, Director, Volkswagen Passenger Cars India, said that post the four SUVs to be launched, a majority of its new models will be SUVs.

On Volkswagen India’s strategy for 2020, he said, “Our strategy is clear, it’s SUVs. We have defined our positioning as a brand — we want to become the most aspirational premium brand in India. And, we identified a couple of areas which is proving this to the customer. The first one is SUV. We believe that offering a host of SUVs moving the brand to an aspiration level to sell, because Indian customers love SUVs.”

Knapp said that the next focus will be to leverage its German engineering as “customers combine Volkswagen with German engineering and approve of German engineers’ Turbocharged Stratified Injection or TSI (Volkswagen’s petrol solution)”.

The company is also working on improving its customer experience by resorting to a slew of measures like changing dealerships and working on new logos and furniture, in a bid to offer a different touch and feel. Since innovation is another focus area, it also wants to experiment with the digitisation of its dealerships, he said.

Volkswagen India is also betting on driving growth from the rural market, which currently contributes a very small percentage to its revenue, said Knapp. It has 28 pop-up stores across the country, through which 20 per cent of the company’s sales are generated. A majority of these pop up stores are in rural areas, he said, and there are plans to increase this.

Untapped market

It is looking at increasing its overall sales touch points to 150, up from the 110 it had in 2017, when Knapp took over. Since the company is already predominantly present in tier-1 and tier-2 cities, it will be the tier-3 and tier-4 towns which will see most of its planned new sales touch points, he said.

“If you ask me, personally, I see that the biggest potential in the medium term of growth is in tier-3, tier-4 towns...The rural market will definitely go up because the density of cars is very low,” he explained. Rural areas, being an “untapped market”, also pose potential for driving more revenue as discount levels will not be as high in these areas as opposed to cities like Mumbai. The competition level being high in such cities lead to higher discounts there, he pointed out.

As for the impact of the outbreak of the Coronavirus, he said that in India, there has been no major issues at the moment. This is even as China’s car industry is down by 80 per cent in February owing to the Coronavirus, which affects the Volkswagen brand on a global level as around 50 per cent of the brand’s sales come from China, he said.