Volkswagen's India plan

Volkswagen recently announced the launch of its high-end luxury car, the Phaeton, in India. Named after the son of Phoebus, the Greek Sun God, it was unveiled at the Geneva Motor Show in 2002, and it hit the market in 2003. But the sales fell short of expectations. It was positioned against top-end brands like Mercedes, BMW, Lexus and Volkswagen’s own Audi. But it lacked the appeal of the rival brands — hence the lacklustre performance. But so keen is Volkswagen to make the Phaeton work in India that it has taken the car back to the drawing board. The result: LED daytime running lights, 18-inch wheels, a new dashboard, 18-way adjustable seats, better upholstery and even new air-conditioning to suit the Indian climate.

Earlier in the month, Volkswagen, headquartered in Lower Saxony in Germany, had announced that it will launch an all-new sedan, the Vento, in autumn. It will be manufactured at Volkswagen’s factory at Chakan in Pune, and has been completely designed to the needs and expectations of the Indian consumer. Also in the works is a small car. At present, there are six cars in Volkswagen’s stables: The Beetle, Polo, Passat, Jetta, Phaeton and Touareg. It could expand to eight. It fits petrol as well as diesel engines into its cars. Volkswagen thus straddles the entire spectrum of the Indian market. Its factory at Chakan, put up at a cost of Rs 3,200 crore, can make 110,000 cars in a year. Those who have seen the factory say this capacity can easily be doubled because of the modular nature of the plant.

Along with its other brands, Skoda and Audi, Volkswagen has a share of less than 1 per cent in the 1.3-million per annum Indian car market. From here, Volkswagen wants to raise it to 10 per cent in five years. India is vital for Volkswagen’s plan to become the world’s largest car maker by 2018. In 2009, it sold 6.29 million cars. This had placed it on the third spot after Toyota (7.23 million) and General Motors (6.50 million). Volkswagen is the largest player in China, Europe and South America. In China, it sold 1.4 million cars in 2009 — more than the entire Indian market — and its share of the market was an impressive 18 per cent. India, which is expected to grow to 3 million cars in five years, is the final frontier. By itself it may not catapult Volkswagen ahead of Toyota and General Motors, but it is one of the few markets left with large sale volumes up for grabs.

Automobile analysts expect Volkswagen to use its learnings in China here. These could be aggressive price tags and high-decibel advertisements. But China and India are different markets. Large cars rule the roost in China. Small cars form more than two-thirds of the Indian market. On the positive side, Volkswagen’s strength lies in the mass market. Its name, after all, means people’s car in German. Its presence in India can no longer be dismissed, admit some rivals. But quite a few insist that it will be a tough challenge for Volkswagen to get 10 per cent of the market in five years flat. They point to the example of General Motors which had in mind a similar market share by the end of this year but is now unsure if it will be able to meet the target.