India on VW radar for Strategy 2025

India could be a key part of Volkswagen’s Strategy 2025 that will be unveiled in the coming months.

This vision statement, which is the brainchild of CEO Matthias Mueller, will focus on a host of issues relating to products and synergies aimed at maximising profitability. It is also an effort to put the house in order all over again after the diesel emissions scam of 2015 which literally crippled the VW brand.

India may be a small market for the German carmaker right now but, going forward, will play a big role as part of an emerging markets strategy that the company is putting in place now. Automakers like VW have realised that it is impossible to ignore these high growth regions even though profitability continues to remain a challenge.

“We have now taken decisions at the brand-fold level to empower the region a lot better. We are forming a team that should combine the economy markets around the globe where VW is traditionally struggling to grow its footprint,” Jurgen Stackmann, Member of the Board of Management of the Volkswagen Passenger Cars brand, said in a recent interview.

The idea is to ensure that the VW group understands market needs, cost structures and the way forward for those 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.

India, South America and Africa are relatively weak for VW which explains the need to create an organisation that should give more insights on how to “create economically” for this region. “I do believe you need to have a mentally global connection of this region since emerging trends are similar in terms of compact SUVs and economy sedans,” said Stackmann.

It is his belief that if VW is successful in India, it can replicate this in many other parts of the world as 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,” he added.

VW, in his view, remains very optimistic about India for a host of reasons. It started operations here eight years ago “which means we are a young brand with a young, spirited team and young customers”. The carmaker has also taken some big decisions going beyond its role as an exports hub. The biggest VW-selling car in Mexico, the Vento, is made in India and shipped out from here.

“Underneath the surface, a lot of decisions went into a much more structured and sustainable operation for VW in India. I am actually confident that we hit the brand at a great time where we truly understand the needs here,” said Stackmann. According to him, people who buy VW have high demands on quality and expect the brand to be better than the rest on safety. “Obviously, we need to be superior but this mean tailoring that (strength) to being superior to the market we are operating in. We need to develop this as a skill moving forward,” said Stackmann.

It is here that the Ameo compact sedan is an important start to this journey as it is a concept tailored to meet the needs of the Indian market at an affordable price. “We are now exploring how affordable we need to be to grow our share in the country and still stay VW,” he said.

Going forward, Stackmann said he was optimistic about VW’s business prospects in 2016. The company is counting on Europe to deliver another “solid year” while it sees stability in the US and good growth in China, its largest market. And even while China is slowing down, Stackmann said this was “always relative” since even single digit growth of seven per cent translated into adding 1.5 million cars annually. There are some dark clouds, however, on the horizon. “We have an economic crisis going on in South America which is impacting the auto business in a big way especially Brazil.” If the growth script does go according to plan, it will be the best piece of news for VW which would rather forget 2015 in a hurry. To think this was the same company which had overtaken Toyota in the first half of the year to emerge the world’s No 1 carmaker. Right now, it would rather focus on regaining brand credibility first before working its way back to the top.