It would have been a bit too much expecting Matthias Mueller to discuss India in his ‘Together – Strategy 2025’ presentation last week. After all, the country is still a minuscule part of its overall business.
Yet, the CEO of the Volkswagen Group dropped a broad hint as he spoke of the challenges and opportunities ahead. “We are finally going to launch a compelling offering in the booming economy segment – together with partners from the relevant regions, in other words, Asia. Talks on this are already at an advanced stage,” he said.
It would be premature to infer if India will play a role in this particular initiative which is part of Mueller’s plan to drive profitable growth and build new strategic core competencies. What is clear, though, is that the German carmaker realises that emerging markets like India are the growth engines of the future.
This is precisely what Jurgen Stackmann, Member of the Board of Management of the Volkswagen Passenger Cars brand, had stressed at the Delhi Auto Expo earlier this year. “We are forming a team that should combine the economy markets around the globe where VW is traditionally struggling to grow its footprint,” he said.
At this point in time, the not-so-strong markets for VW are India, South America and Africa which justifies the need for an organisation that can give more insights on how to “create economically” for these countries. “I believe you need to have a mentally global connection of these regions since emerging trends are similar in terms of compact SUVs and economy sedans,” said Stackmann.
Going forward, the job on hand is get the VW group to better understand market needs, cost structures and the way forward for those growth regions where India will play a major role. “This solution has to be part of our Strategy 2025 in terms of how to grow, how much to grow and what our products should look at in the economy markets, which are so called because the price pressure there is so high,” added Stackmann.
According to him, if VW was successful in India, it could replicate this in other parts of the world since the market here is particularly aggressive on pricing. “We see a stronger role emerging in India going forward connected with the operations we have in South America and perhaps South Africa,” said Stackmann.
In any case, India is already an important export hub for VW and its top-selling model in Mexico is the Vento that is shipped out of here. Further, the launch of the Ameo, as a solid value proposition in the entry-level sedan space, clearly suggests that the company has quickly figured out what it takes to appeal to the Indian customer.
If the Ameo does notch up reasonably good numbers, it would be fair to assume that VW will leverage the subcontinent even more aggressively in the future for its emerging markets business. This may not have been mentioned in Mueller’s Strategy 2025 vision statement but VW cannot possibly afford to ignore India and other growth regions in Latin America and Africa over the next decade.
Building on strengths
The CEO also spoke of the need to focus on better brand positioning as well a “rigorous review” of the present model range to better understand what customers across the world really want. In addition, Mueller said VW would streamline its modular architectures to make even “better and more disciplined use of their benefits”.
It was his view that the carmaker was starting to try and do too many things at once. In the future, instead of 12 variants as planned, VW would work with just four major architectures: one each for economy vehicles, volume models, the premium segment and sports cars.
The interesting part about the presentation was the reference to the Group’s commercial vehicles business comprising Scania, MAN and Volkswagen Commercial Vehicles. The first two are already present in India and it is logical to infer that there will be important synergies at the back-end especially in sourcing of components to keep costs in check.
According to Mueller, the goal to create a “global champion” in the CV space was perhaps ambitious but still realistic. “Because we have strong brands, we already lead in many future technologies. We will significantly improve the group’s overall performance, and expand our global footprint especially in the regions where we are still punching below our weight,” he reiterated.
Quite unlike Vision 2018 where VW aggressively articulated its vision to be the top carmaker in the world, Strategy 2025 steered clear of sales numbers with Mueller prioritising “clear, binding targets” instead. “Size is not an end in itself.
Rather, it follows automatically if we are successful,” he said, a clear reference to the diesel scam and the work ahead in cleansing the overall brand image.