Michael Perschke, Head, Audi India

The luxury car market was gaining some traction in India and Audi especially did rather well, registering the fastest growth. Has the Budget 2013-14 dampened your plans?
By mid-2013, we have planned to start assembling 90 percent of our demand here. It’s the high-performance cars like the S6, S7, RS5 and the R8 that will be mostly affected by the hike in duty. All the other cars like the A4, A6, Q5, Q7 (which we started in November) are built here. That’s one advantage we have over competitors, with local assembly of our high-end SUVs. The production of the Q2 will also commence in July here. The A8 is the only high-volume seller that’ll be affected. We are well prepared to deal with the situation as compared with most of our competitors who import a majority of their products. We have done our homework well. As for the super-luxury segment, no one makes them in India. So that’s an equal disadvantage for everyone with products in the segment.
Last year, you exceeded your own sales projections and claimed you’ve captured about 30 percent of the market in the segment. What do you think of your prospects this year?
The 775 cars sold in February 2013 make a healthy 29 percent growth in a stagnating and challenging market scenario. (In March, Audi India sold a record 1,104 cars.) We’re constantly updating our product portfolio and have new dealers in place this year and hope to beat last year’s numbers.
What is your forecast for the luxury car market in India by end-2013?
When we started last year, the projections were around 35,000 cars for the luxury market but the market closed at around 30,000, so it underperformed. This year, with new products like the A-class, B-class and 1-series, the market should definitely grow, more at the bottom end of the market than the top end. So the market could be between 35,000 and 37,000 cars. As we have about 30 percent market share, we shall look to sell at least 10,800 cars. Post-Budget, that number does look a little challenging. But then, last year, when we announced an 8,000-car target, that was before the Budget, before the interest rate increases and inflation, among other deterrents. But we still crossed 9,000 cars.
Will the hike in customs duty expedite Audi's CKD plans?
First of all, we’re already in expansion mode in Aurangabad. We’ve built a Hall C that can accommodate the Q7 and has enough space for the Q3. At Aurangabad, we have still expansion capacity. We’re lucky we’re part of a big group. Pune is another location where expansion can be done. It’s only producing the Fabia, the Octavia, the Vento and the Polo. In future, if we want to build cars in the vicinity of the Chakan plant or build our own plant, we have the space, body shop, paint shop, logistics yard and a technical training centre. We’re geared up for the future. Question is what the future demands, how fast and which segments are growing and right now we’re in a deep analysis with our Board, whereby we’re working on a reasonable expansion plan and we don’t overplan as we’re still luxury players and prefer to produce one car less than one car more than the actual demand. I see a great opportunity as we have so many different products. Out of 42 products, right now, we are offering only 9 or 10 in India. If we choose the right products – for example, there’s the Q2 coming up – at the right time, I think it’ll manifest our market leadership.
What are the prospects for the S7 in India?
We are launching the S6 this year, which will be our high-performance version from the A6 range, and possibly the S7. It has the same genes as the A7 which has proved to be quite a headturner here and has won several awards for its design. This car has a high-performance twin-turbo engine and does the 0-100kph sprint in 4.7sec. It hits a top speed of 285kph, something you can enjoy on the long stretches at the Buddh International Circuit. Things are slightly more difficult now though with the raised import duty.
The A3 and A1 belong to the segment that is new and coming up in India. What are Audi’s plans?
At the Auto Expo 2012, we showcased the A3 saloon with e-tron drive as a concept. I think the A3 fits very well into the Indian market. We have the A3 Sportback which we haven’t really considered as I don’t think the luxury hatch segment is very considerable here yet. It could probably take off in a couple of years. India is not ready yet for crossover body styles. The A7, for example, is a beautiful car but in a crossover body style which the traditional Indian customer is not ready for yet. He prefers the traditional saloon style and SUVs. We’ll probably see growth in the traditional segments. That’s why we have the A3 saloon and the A1. We also have the Q3, which we haven’t leveraged at all. I see a lot of potential which we shall most likely capitalise when the Q3 production starts here. But we’re not desperate for volumes, we want to build the market like we did for the last five-six years – top down. There are also plans for various derivatives of some cars as we produce a number of them. We have some great new engines, new features lined up. We will continue our product offensive this year and additionally grow our dealer network, reaching out to the Tier 1 and Tier 1 cities. We’ll strengthen our stronghold in Delhi and Mumbai. In Delhi, we have a 42 percent market share. We’re on a good wicket with our marketing, products, position, dealership.
There is an argument that there is undercutting of prices in the luxury car market in India and Audi is quite active in it. What is your response?
This is mostly noise made by others. We’re not really heavily into discounting, it’s just that we offer very good customer value and have attractive financing schemes from Audi Finance like an 84-month scheme, the Bullet scheme. These schemes are helping widen the market. You’ll never see an advertisement from Audi in which we scrap a certain list price and offer a different price. Discounts will get you short-term sales but we believe if we offer value to the customer, it has to be on the back of value perceived by the customer whether it be in insurance, service or attractive financing schemes. One shouldn’t play around with things like list price.
So you have five-six introductions this year?
We have already done three – the Q5 facelift, R8 V10, Q3 TFSi. The S6 is very much on the drawing boards. We have two or three left. We wish to capitalise on a strong product portfolio, good network and service quality.
Five years from now, what is your prognosis for the Indian luxury car market?
Historically, if you analyse the luxury car market here, you’ll see that in 2010, it was 0.5 percent of the total market. In 2011, it moved to 0.7 percent and in 2012, it was at about 1-1.1 percent. In 2013, we should see it rise to about 1.4 percent. This is still a minimal figure compared to China where it is 8-9 percent, Sweden where it is 20 percent and South Africa, 23 percent. If you consider this, I’d say the luxury segment has a very bright future here.It would help things if there is an FTA between Europe and India but I have my doubts about this. I would say the luxury market could grow to 4-6 percent of the total market here in the next 10 years.
You’ve had a successful stint in India as Audi chief so far. Will we see you in India this time next year?
Never change a winning team. I’ve worked hard with my team and owe my success to them and the dealers. I’d love to stay here and see through my goal of being the number one luxury carmaker in India by 2015.