Companies

Volkswagen will stick to India 2.0 plan, no change in strategy due to slowdown: official

Nandana James Mumbai | Updated on September 09, 2019 Published on September 09, 2019

Steffen Knapp, Director of Volkswagen Passenger Cars India. Photo: Paul Noronha   -  BusinessLine

Even as the auto sector is grappling with one of the worst slowdowns ever, resulting in changed strategies and deferred investments, Steffen Knapp, Director of Volkswagen Passenger Cars India, said for his company there is no change in strategy due to the slowdown and it is sticking to its investment plans announced under India 2.0.

The German auto major had announced the India 2.0 project last year, along with Skoda Auto, with a planned investment of ₹8,000 crore to strengthen its operations in the country.

While acknowledging that there have been “dramatic” dips in sales, Knapp pointed out that a “major disruption” like the impending transition to the BS-6 emission norms (set to be enforced from April 1, 2020 onwards) is bound to impact demand.

“We have decided to invest a billion euros into India...All these plans are in the implementation phase. There's no slowdown, because we believe in the fundamentals of India as a market,” Knapp told BusinessLine.

Knapp said when the Volkswagen brand started operations in India in 2007, the target group the brand was catering to comprised of 7-8 million people, which has now ballooned to 70 million.

Inventory under check

In the short term, there is a need to keep the inventory under check and aligned with the market demand, he said. Knapp said the company has been undertaking this approach of a close inventory check for almost a year-and-a-half by now, ever since the last festival season, which did not meet expectations.

Volkswagen India is also planning to double its market share to 3 per cent in the next five years, by following what Knapp described as a sustainable business model, for the partners, dealers, OEMs, suppliers and customers.

Knapp, who has been the Director of passenger cars at Volkswagen India for two years, admitted that earlier, the company had lacked a clear strategy for the country. The future plans for the Indian market is fully focused on implementing India 2.0 and on becoming a sustainable premium brand in India. “The core India 2.0 is about local, localised products in a mass segment. The only way to be successful in India and to be accessible is localisation,” he said. The plan is to increase localisation from the current 82 per cent to around 95 per cent under this project. Volkswagen Passenger Cars India also plans to increase its network by 20 per cent to 150 touchpoints in India by the end of 2019. These 150 touch points would include conventional showrooms that can be a full-fledged dealerships, pop-up or city stores across India.

Small towns, cities

It is using the pop-up store format, as opposed to full-fledged dealerships, to further augment its reach in the cities it is present in, apart from using this as a way to enter the tier-3, tier-4 markets, where the company currently has negligible presence. It is eyeing an expansion to 45 tier-3, tier-4 cities through the pop-up and city store concept, which are more cost-effective, efficient and has a quicker ROI, he said. These pop-up stores are essentially low-cost set-ups, aimed at increasing the brand reach in a cost-effective manner. It has launched four such pop-up stores so far, with plans on adding 30 such stores this year and another 20 by the end of 2020.

Currently, it has 132 showrooms, 113 service workshops, 105 DasWeltAuto outlets across 102 cities in India.

Published on September 09, 2019
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