Volkswagen prepares base for new drive with Skoda

Steffen Knapp admits that his plate is a lot bigger now but he is enjoying every minute of it.

“It is interesting for me because I am now looking at quality, plant, HR policies and a whole lot of areas. My core function is to drive the Volkswagen business,” says the Director of Volkswagen Passenger Cars India.

All this is a result of the rebooted business model which will now see an integration of Skoda and VW for the business here. This was created as part of the VW’ group’s realignment priorities for a host of countries worldwide. In the case of India, it was decided that Skoda would lead the way with VW in tandem.

For Knapp, who was initially responsible just for a single entity, his role has grown in this new marriage, where the goal is to “present one strong Skoda and one strong Volkswagen”. He represents VW and remains the key contact person for the local business. “I am basically Mr Volkswagen in India,” quips Knapp.

Thanks to the integration which has spawned the new entity, Skoda Auto Volkswagen India, there is now a far more cohesive plan and strategy in place, “which means we know where to go in terms of product”. As he says, the key is to position VW as an SUV brand where there will be four models launched in the next two years.

“There are a lot of things that have changed over the last few months with a new management structure and the momentum now in place. We are part of India in a bigger way,” reiterates Knapp. This essentially means that there is greater focus on productivity, quality and so on. “We are getting to be an integrated company and that is good, which means we are in the right direction,” he says.

No cakewalk

Clearly, this will not a cakewalk since teams from both companies will now need to deal more closely with each other. Egos will have to be set aside and the key is to collaborate while working towards a common goal. “It is our duty as a brand to maintain the balance,” says Knapp.

This becomes crucial since some people could go overboard with the new power structure. Eventually, from the VW group’s point of view, it is about two entities working together for a common goal unlike the not-so-distant past, when the focus was more insular.

“Today, people within are extremely upbeat and know what the objective is in terms of strategy. They know what they are looking for in terms of the goals and everything is working well. There is now tremendous flexibility all around,” says Knapp.

He also makes it a point to emphasise that “I know what I am talking about” since he has a better view of both sides now and the need to think more cross-functional in terms of team/individual responsibilities. “All in all, this was the right decision for us since we need to be lean, fast, nimble and quick to react,” says Knapp.

There was really no other option but to forge a new business model where, in the case of India, Skoda is leading the way. Sure, this could cause some heartburn initially but this is but inevitable in any new integration model. This is now par for the course in other similar alliances, be it Toyota-Suzuki, Renault-Nissan, Mahindra-Ford or, more recently, Fiat Chrysler-PSA.

Knapp then takes a little detour to narrate an incident that occurred during a visit to Guwahati. He was gifted rhino models coloured black and white and admits that he had a lot of fun with them. “Every time someone did a relatively bad job, I would put a black rhino on the table,” he laughs.

He gifted a similar model to his senior colleague in VW’s headquarters at Wolfsburg when the two were talking about the India business. “He looked at it curiously and I told him that the rhinos in Guwahati are disappearing quickly and you need to take care of them — ‘don’t forget that with this on your table, you need to support India’,” recalls Knapp.

It was obviously said in jest but the point that comes through loud and clear is the VW group’s serious intent about putting its India house in order. It had not been successful in its earlier avatar as a singe entity. And while it is now part of a new alliance with Skoda, the challenge is to ensure that each brand is a differentiator to the end user.

As of now, when it comes to total cost of ownership (TCO), VW is perceived to be more expensive than competition, which is not the most ideal formula for a price-sensitive market like India. The company knew this had to be resolved and reduced the prices of parts in 2018.

This meant taking a hit in this “painful exercise” since there was a cost incurred with just 83 per cent local content. “We decided to go ahead anyway even though this is a tough environment, and got this across to the customer,” says Knapp.

This was accompanied by initiatives on warranty, services etc while also investing “a lot” in training the manpower to get the right quality. To ensure easier availability of parts, VW set up a warehouse in Pune which is intended to contribute to the effort in improving customer experience.

Perception change

“We know where we stand and need to change perception. It is not the easiest of tasks but must be done while assuring top quality at competitive costs,” says Knapp. Clearly, the top priority is to alter customer perception of VW as an expensive brand, especially when its first product under the India 2.0 programme with Skoda is scheduled to debut in 2021.

For now, Knapp says, there are no issues when it comes to quality and safety but the important task on hand is to ensure that the TCO structure is in place. After all, customers will expect this kind of a cost base for the new products.

“This is where loyalty becomes important and we can keep them in our fold. This TCO exercise is hard work but imperative for the future to change perception,” he adds. Clearly, this will take a lot of time even while work began in 2018.

As Knapp says, the key is to have a plan in place which is “the right thing to do where everyone has an idea of where we are heading”.

He is reasonably confident that there is more positive energy all around with good talent to take the story forward. The other bit of positive news is that attrition is low, which is welcome at a time when competition is keen on poaching talent.

At the front end, for retail and distribution, VW has kicked off corporate business centres and pop-up stores as new initiatives to woo customers. In Europe, VW is the premium brand while Skoda is the affordable option. However, in India, it is more neck-to-neck since both brands pretty much cater to the same set of customers. This is where differentiation becomes critical in terms of product and customer experience at dealerships.

“It is eventually about what the brand stands for, how we communicate, customer engagement and our range. The most aspirational premium brand is what VW will be about,” says Knapp. There was a statement of intent at the Frankfurt Motor Show on electrification which may not be on the short-term radar for India but still conveys a certain brand positioning for VW’s Indian customer.

In an earlier interview, Knapp spoke of electric being ideal for cities like Mumbai and Delhi, where distances can be covered comfortably. “In my personal opinion, cities are better off with electrification and the timing is just right with the levels of pollution growing,” he had said.

From his point of view, electrification also represented an “enormous opportunity” for VW as a brand since it was essentially delivering the future. This may not happen in a hurry in India right now but there is no telling what is in store, especially with the environment now a huge area of concern worldwide.

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