Volkswagen Group's 2+2 approach to gain 5% market share in India

by Mayank Dhingra 04 Feb 2020


The Volkswagen Group, which operates in India with its Skoda and Volkswagen brands operating in the mass-market segments, and Audi, Porsche and Lamborghini sitting as crown jewels in the premium and niche categories, is all set to re-energise its business and target growth and sustainability for its partners in the country.

At a mega Skoda Auto Volkswagen India Media Night event in New Delhi on February 3, the Group gave a hint of its might with a product showcase each by Porsche (new 911) and Lamborghini (Huracan Evo RWD), launch of the new Audi A8-L, and two new Concept unveils by Skoda and Volkswagen India in the form of the Vision IN and the Taigun, respectively.

The two crossover Concepts based on the Group's India-specific MQB-A0 IN platform, are being touted to catapult its India operations to a growth trajectory with high hopes riding on the mid-sized SUVs, designed and developed with extensive inputs from India. Skoda also recently inaugurated the Skoda Auto DigiLab India, its new digital tech centre.

Two UVs and two sedans aim for 5% market share in India
While Skoda will launch the Vision IN in early 2021, Volkswagen will introduce the Taigun in the second-half of 2021, with a bigger Group roadmap of bringing four UVs to India over the next two years. However, what will follow a new UV from each of the two brands is a sedan model and this, in company speak, is its 'two-plus-two' approach wherein two UVs and two sedans will strengthen its arsenal to enable its second march in India.

According to Bernhard Maier, CEO, Skoda Auto, "We will start with SUVs because it is the fastest growing segment globally. Having said that, while sedans have reached stagnancy, they are still selling in big numbers." While Skoda India sold 16,521 units in FY2019 with a market share of 0.49 percent, Volkswagen India's sales were double at 34,859 units and claimed a market share of 1.03 percent.

With regards UV sales, Skoda India managed 2,038 UVs in FY2019 with a miniscule market share of 0.22 percent while VW India's numbers stood at just half at 1,054 units and a 0.11 percent market share. The duo is now eyeing a 5 percent PV market share in the country by 2025, with the future product focus set majorly on UVs for the Indian market.

Brand Skoda, which is leading this rebirth of the Group in India is charged with the primary responsibility of conducting the activities planned under the India 2.0 strategy. The company aims to grow its sales from the current 15,000-odd units to 100,000 units by 2025, which it says, is very critical for its growth in the country as well as sustainability of its dealer partners, and will also make Skoda India get recognised in the Top 5 among Skoda Auto's global operations.

One-billion euro investment in tooling and localisation
Concerted efforts are also being made towards improving network, performance and the viability of the Group's dealer partners in India with the end-goal being customer centricity. While Volkswagen aims to grow its total number of touchpoints to 250 by end-2020, Skoda will enhance the number from the existing 85 to 200 sales and service outlets across 150 cities by 2023.

"One area untouched so far but is very important is that of aftersales. Aftersales service, behaviour and the speed of solving issues is of utmost importance. We know there was a lack in the past, and we know there is definitive room for improvement," Maier added.

The India 2.0 strategy will see Skoda investing a colossal one billion euros (Rs 7,867 crore) into technology upgradation at its factory in Aurangabad,  tooling-up at its suppliers as well as new product development. The Vision IN will see 90 percent localisation at launch which will increase to 95 percent by 2022. "Localisation is going to help us play better in the Indian market within the India 2.0 strategy," Maier remarked. 

While the MQB-A0 IN is a derivative of the MQB platform underpinning a host of the Group's models globally, it has been streamlined for Indian requirements and can be used with locally available steel offering equivalent strength. The company says it has re-engineered components to offer similar results as well as its Press tools, based on manufacturability analysis with Indian steel. Safety, however, is a big USP for Volkswagen Group cars and the claim is that it won't be compromised, in these new models.

"We have always looked for synergies when it comes to back-end such as electronics, products, R&D and technology. However, when it comes to the front-end, absolute differentiation is needed to demarcate the two brands," said Maier.  

"Synergy is the way forward and in the future, we will see more mergers and tie-ups taking place in the automotive industry," he added. The company is trying horizontal deployment of key attributes of the India 2.0 strategy in other markets as well and sees possible applications of the approach in countries like China. It is also learnt to be assessing a mutually beneficial segment for both India and Russia.

On the road to electrification
Even as ICE vehicles start becoming cleaner with the latest emissions technologies posting stringent emissions requirements, the Volkswagen Group is aiming CO2-neutrality by the year 2050. Under its 'Strategy 2025', the company is investing 11 billion euros towards e-mobility and has planned to build 30 new models, out of which 10 will be partially or fully electrified in the EU, China and the US markets by 2023, starting with the ID3 all-electric hatchback.

For Skoda, the company introduced its Superb plug-in hybrid last year, while the Citigo is its first all-electric model, globally. It is also set to reveal the Octavia plug-in hybrid at this year's Geneva Motor Show. The company will start its electrification journey in India by launching a high-end full-electric car later in 2020, and will assess the market before going any further.

"When it comes to India, the problems here are no different than the rest of the world. Infrastructure is the key issue at this point in time, and so it doesn't make sense to get any EV to India right now," Maier concluded.

With no incentives to hybrids, it doesn't intend to bring any hybrid models to India either.

Also read: Skoda Auto India's Zac Hollis: ‘With 95% localisation, we will be able to make the Vision IN competitive.’