Is Volkswagen losing plot in India?
There is no doubt that Europe’s largest carmaker Volkswagen has ambitious plans for India. The firm has openly declared its intentions to emerge as the largest car maker in the world by 2018 and to that end, India has a big role to play. For it is in emerging markets like India, a country where it is a late entrant, that it can get large scale incremental volumes.
To give them their due, Volkswagen has acted fast after its entry in 2007. Starting with the Passat and Jetta, it launched its first small car—Polo—in just three years. That was followed by the launch of its entry level sedan based on the same platform—Vento—barely 6 months later.
Others like Toyota and Honda who have been in India for much longer, have in comparison taken ages to get into the small car segment. These launches gave the German company much needed momentum. It grew in high double digits and sometimes even in triple digits throughout 2010, a historically high growth year for the industry, and even in 2011 when the industry witnessed some strains, it did quite well. A lot of this growth could be misleading. For example in April 2011, VW’s sales grew by a staggering 370% on the back of a ridiculous 900% plus growth in March 2011. But in absolute terms it sold a mere 7000 cars, less than a tenth of market leader Maruti Suzuki. In economic terms, such a scenario is described as a result of base effect. Even then these numbers would have been heartening for a new entrant.
Famed as a superpower when it comes to compact cars with one of the best diesel engines to boot, you maybe forgiven if you believed the story would continue this year as well. It has been one of the worst starts for VW in India this year and though 3 months is never enough to forecast how the full year will pan out, there are some ominous signals. Its sales declined in December, when the industry recorded a turnaround, lagged industry’s moderate single digit growth in January and declined again in February, a month that proved to be the best ever for the industry. Somewhere, something certainly is amiss…..
Vento is down, Rapid is up, Verna is already away
Even as everybody thought it would be the Polo that would be the bigger success, it actually has been the Vento that gave VW the first scent of outright success. Launched on the flank just before the demand for diesel cars was taking off in India, Vento was a roaring success in 2010. It fought hard with market-leader Honda City, and easily decimated other petrol sedans like SX4. It also managed to beat the old Hyundai Verna, which was also offered in diesel but never had the finesse and sophistication of a Vento.
That happiness however, lasted only for 7 months. Hyundai brought in the redesigned if not re-engineered fluidic Verna, and Vento’s leadership was quickly usurped. That was followed by the launch of Skoda’s version of Vento—the Rapid, and strangely it is also giving the car a run for its money.
One wonders what would happen if the government does impose a stern tax on diesel cars on Friday. The share of petrol variant in overall Vento sales is abysmal and it would surely not be good news for VW. After a year long stint in the wilderness, the City is already on the verge of a comeback (it was the largest selling sedan in February). In just about 2 months time, Vento, once a serious challenger, could turn out to be an also ran. And join its stablemates Polo and Jetta at the bottom of the ladder in their respective segments.
Polo, a great car, but at best an under-achiever
Worldwide, the Polo is one of the best selling Volkswagen cars. It is hugely popular in other small car markets like Germany, Brazil and France. It is am impeccably designed car that is powered by a great range of engines—from the 1.2 litre frugal petrol to the high on torque diesel to the out an out performer of a 1.6 litre petrol engine.
Even then, thanks to some insipid planning that bordered on arrogance, the Polo has been an underachiever. Launched a week before the budget in 2010 (when it was certain, taxes on small cars would go up), the company had to quickly revise prices after 10 days.
Around the same time another great trans-Atlantic rival Ford was ready with its own first small car for India. But it waited for the budget, revised its prices (downward I am told) and launched it 9 days after the B day. As the figures suggest, planning or the lack of it, settled the battle here. And we are not even comparing Polo with Swift or i20, which are better matched. There would be no point in it.
What is the future
Unclear so far. VW bought shares from Suzuki, hoping that it would tap into Maruti’s expertise in India. That plan has gone kaput. It also planned a car smaller than the Polo to bite into the meat of India’s small car market. Even though, they have launched such a car—the Up—in Europe, for now its launch in India looks hazy.
So what can we expect from Volkswagen’s enviable global line up of cars?? Nothing spectacular or exciting for now. It does not have a full fledged R&D or design centre in India, which means a global model will not come from here. And among its global cars, only the Up seems to be an exciting prospect. But it does not look like its on it way here anytime soon.
Déjà vu….the more things change, the more it stays the same
Two years ago, Polo was launched a week ahead of budget. This year, the company has rolled out a number of schemes right before the big day– Including a middle variant of the diesel Vento, a belated move that could have revived the car’s fortunes. I hope they would not need to revise the prices again tomorrow.
There are other funny things that VW is doing that may prove to be its undoing. Like doling out big discounts in the name of a “once in a lifetime offer.” It does not auger well for a company that believes its cars sell on their own and don’t need to be pushed. Discounts in India, are a way of life, but only for those who cant sell. Ask Maruti for Swift and Hyundai for a i20 or Verna, and they will concur.
Or launching a DLF IPL II edition on the lines of a flop IPL I edition last year. Its like making a sequel to Ram Gopal Verma ki Aag. Why commit a mistake twice?
And if you think it is not a mistake, consider this. Would you want your car to sport a badge that has DLF IPL II pasted all around, a tournament that has as much muck as the river bed in Allahabad after the Ganges has receded. Or would you want a sickly caricature of a cricketer presumably hitting a six, embossed on your seat cover? I would not.
But it all boils down to this…..is VW learning or even listening? I don’t think so.