Volkswagen says ownership cost of cars cut 25%, aims to double market share

Volkswagen Passenger Cars on Friday said it has managed to reduce the total cost of ownership (TCO) for its cars by one-fourth with the help of several measures adopted by it. The company plans to reduce the TCO further with increased localisation and ‘child parts strategy’.

“One key reason why our brand has not taken off is TCO. Customers have been saying that our TCO has been much higher. We have taken this very seriously in the last two years and will remain focused on reducing TCO in the coming years too,” said Steffen Knapp, Managing Director, Volkswagen Passenger Cars.

As a result of its stronger focus on TCO, the company has cut its parts’ prices by 15 per cent despite taking some hit as it still imports several parts which attract higher import duty. It also set up three parts centres to improve the availability of spare parts. It has also improved its service packages with extended warranties and several add-on features.

“All the above efforts have resulted in a reduction of 25 per cent of TCO in our cars,” said Knapp.

‘Child parts strategy’

Now, it is working towards increasing localisation in vehicles up to 93 per cent from about 82 per cent now. Also, it has planned ‘child parts strategy’ (replace specific part rather than the whole module) to make the servicing cheaper.

Knapp also said the Volkswagen Passenger Cars have been making good progress on the six strategic areas as part of India 2.0 project. The six areas are people, brand, network, corporate business, loyalty and digitalisation.

On the people side, attrition has been reduced significantly and it is investing a lot in training and focuses on inclusive and diverse management policy.

Volkswagen will position itself as the most aspirational premium car brand in India.

The company plans to reduce the number of dealer partners from 80 to 50 gradually. Now, it has reduced to 62. However, touch points will continue to increase — from 120 now to 150 in the next two years, but mostly by existing partners.

It believes the corporate business segment holds good potential with emerging subscription and leasing models. But Volkswagen has been very weak in tapping this in the past. As a first step, it made its cars cost-competitive by adjusting some costs, strengthened the team for this business and has also created seven corporate business centres, which will be ramped up to 25. It also offers faster servicing options along with other promises to the customers in this segment.

With refined loyalty programmes, the company sees more repeat customers. Its sales and service areas have moved to digital and it has planned more with training and other measures. Its next new car, being built on a new platform, will come in 2020 and the company will strengthen its SUV portfolio in India, going forward.

It has set a vision to double its current market share of about 1.5 per cent in five years (with volumes of 1-1.2 lakh units vis-à-vis 30,000 plus now) with its proposed measures.

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