 "<b>Lunch with BS: </b>Arvind Saxena")
Firefighting would surely be a big understatement if one were to describe the work profile of Arvind Saxena when he took over as the managing director of Volkswagen (VW) Passenger Cars in India in August last year. Here's why. Sales in the preceding four months, April to July, 2012 had dropped almost 17 per cent after a spectacular growth of 52 per cent in the previous financial year and the German auto giant's market share fell to 2.4 per cent from 3 per cent at the end of the last fiscal, write Shyamal Majumdar and Swaraj Baggonkar.
As if that were not enough, three months after he took over, a top VW Group executive said in a public forum that the business case as far as India is concerned isn't positive and the country would not be a priority market for the introduction of new models. The executive seemed to be walking the talk because India has been waiting for a new model from VW for three years now - a period of unending launches by its competitors.
The firefighter, however, shows no signs of these tensions as we settle down at Red Zen, a multi-cuisine Asian restaurant at the Courtyard by Marriott in Chakala - an area in Mumbai's western suburbs where chaos seems to be the only constant in the form of traffic jams, dug-up roads and the seemingly unending work on the Metro railway. Saxena chose the venue because it is a few minutes away from his office though that didn't help much in terms of timing because his colleague said his car got stuck in an alley just outside the hotel.
The more relevant point, he says, is that no company in the world can do wonders by posting over 50 per cent sales growth year after year. In any case, arresting the decline is a formidable task in a market that is sinking and where demand for all auto manufacturers is nowhere close to the boisterous sales charts seen in the last three years. "I have not seen such a steep and consistent decline in sales by the industry in at least 15 years," Saxena says, adding people buy cars when they are in a happy frame of mind and are confident about their future income streams. During the 2008 crisis, there was still some optimism left but this time the mood seems to be becoming gloomier by the day.
But the old warhorse of the auto industry is using the time to fix the nuts and bolts of the game (stabilising, consolidating, and taking the company to the next league). These may not make headlines but is critical to Volkswagen's evolution in India. As the steward serves dim sums and Tom Yam Goong, a traditional Thai hot and sour soup, Saxena says the first phase of the car maker's journey in India since 2007 saw many high-profile launches including the Passat, Jetta, Vento and Polo. These launches coupled with high-pitched brand promotions, including a two-year sponsorship contract with the Indian Premier League, ensured steady volume growth.
"We did quite well in that phase to create brand awareness in India. But when you have ramped up so rapidly, sometimes the fundamentals of your business take a back seat because your business becomes much easier," he says. His love for Thai food, notwithstanding, we notice Saxena has still not started on his soup.
The fundamentals, for example, include getting the sales and service network right so that the back-end systems are robust enough to service large volumes and the network becomes more customer-centric. "The focus is not on just the footfalls in our showrooms but on increasing that percentage of customers who buy our cars. My priority is to increase our ability to convert footfalls into sales and make customers happy about our brand and service," Saxena says. The rain lashing the window panes finally prompt him to focus his attention on the hot soup.
Since discounts have become highly commoditised, Saxena says the name of the game is to bring in "innovative" schemes. For example, only a few months back, buyers were asked to drive away the Vento at just Rs 1 in exchange for their old car, with the balance repayable after 11 months. What has helped is Volkswagen Finance, the finance arm of the German company, which draws up schemes that are difficult for the competition to replicate.
The used cars market is another focus area for Saxena. Late last year, the company brought Das WeltAuto, VW's branded used car dealership to India. Since the company has just 180,000 to 190,000 of its own models running on Indian roads, Das WeltAuto is looking at selling used cars of other companies as well.
The scope is huge, Saxena says. "Though unofficial estimates put the figure of the used car market in India equal to the new car one, our estimate is that it is 1.2 times larger," he adds. And with just 10 to 15 per cent of an estimated three million used-passenger vehicles (cars, utility vehicles and vans) market sold by the organised players, the scope for growth is huge. This is more so because the average replacement period for cars in India has shrunk to three to four years from five to six years about five years ago, he adds.
The rain has stopped, which cheers everyone up. Saxena orders Thai chicken green curry and rice before going back to his favourite topic. VW, he says, would like to go back to its 3 per cent market share in the immediate future (the target for 2018 is 7 per cent) on the back of new variants of existing models. For example, the Polo 1.2 (GT) TSI, a "line extender" of which he is immensely proud. No surprise, therefore, that the next five minutes are spent on the three pillars on which the product is marketed - "maximum power and minimum consumption", convenience and the best in segment fuel economy. More such special editions, car line extenders with more technology and features are in the offing. In any case, he says, new launches are not the only way to go. For example, VW hasn't launched any new model but it has seen a drop of just 3 per cent in sales in the first quarter of this year against the industry average of 10 per cent decline in the same period.
But to grab that share, VW, he says, will certainly not climb down from its premium tag it has so skilfully crafted in India. "We would like to maintain VW as a premium-mass brand, not a mass-mass brand," he adds. Does this mean the company will not launch its small car, Up!, as promised earlier? He ducks the question but says he would not like to compete purely in terms of price.
In any case, launching a new model is a time-consuming process. It takes three to four years to develop a model from scratch, he says. It's a different matter that the time-consuming process has not been a problem as far as VW's China journey is concerned. Of the 10 new plants VW is building around the world in the coming years, seven will be in China alone. This will raise production by 60 per cent by 2018 to four million units from 2.5 million currently. Saxena knows this but says the situation is vastly different in both the countries and he would only say that India remains a top-priority market for Europe's largest car maker.
The lunch is over but Saxena is in no hurry to leave. The engineer and MBA says he considers himself lucky to have worked in an Indian, Italian, Japanese, Korean and now a German company in his 30-year-long career. "Typically, I find the Japanese spending a long time in planning things before they roll out something, the Koreans are more risk-taking and they challenge things and the Germans put a lot of emphasis on rolling out things," he says.
As his black VW Phaeton rolls into the portico, Saxena says, though he loves to work for a high-aspiration company like VW, he is a stickler for a five-day week across the organisation because he thinks spending time with the family is the greatest stress-buster. There may be exceptions like a two-hour conference call on Saturdays among senior executives, but strictly from home. That surely is a small price to pay for VW's firefighters.
As if that were not enough, three months after he took over, a top VW Group executive said in a public forum that the business case as far as India is concerned isn't positive and the country would not be a priority market for the introduction of new models. The executive seemed to be walking the talk because India has been waiting for a new model from VW for three years now - a period of unending launches by its competitors.
The firefighter, however, shows no signs of these tensions as we settle down at Red Zen, a multi-cuisine Asian restaurant at the Courtyard by Marriott in Chakala - an area in Mumbai's western suburbs where chaos seems to be the only constant in the form of traffic jams, dug-up roads and the seemingly unending work on the Metro railway. Saxena chose the venue because it is a few minutes away from his office though that didn't help much in terms of timing because his colleague said his car got stuck in an alley just outside the hotel.
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The master salesman, whose earlier job was that of a high-profile marketing director of India's second biggest car maker Hyundai, is quick to dismiss any concern over the VW group executive's much-publicised observations, though he chooses the predictable route of blaming the media, which often tends to "take things out of context".
The more relevant point, he says, is that no company in the world can do wonders by posting over 50 per cent sales growth year after year. In any case, arresting the decline is a formidable task in a market that is sinking and where demand for all auto manufacturers is nowhere close to the boisterous sales charts seen in the last three years. "I have not seen such a steep and consistent decline in sales by the industry in at least 15 years," Saxena says, adding people buy cars when they are in a happy frame of mind and are confident about their future income streams. During the 2008 crisis, there was still some optimism left but this time the mood seems to be becoming gloomier by the day.
But the old warhorse of the auto industry is using the time to fix the nuts and bolts of the game (stabilising, consolidating, and taking the company to the next league). These may not make headlines but is critical to Volkswagen's evolution in India. As the steward serves dim sums and Tom Yam Goong, a traditional Thai hot and sour soup, Saxena says the first phase of the car maker's journey in India since 2007 saw many high-profile launches including the Passat, Jetta, Vento and Polo. These launches coupled with high-pitched brand promotions, including a two-year sponsorship contract with the Indian Premier League, ensured steady volume growth.
"We did quite well in that phase to create brand awareness in India. But when you have ramped up so rapidly, sometimes the fundamentals of your business take a back seat because your business becomes much easier," he says. His love for Thai food, notwithstanding, we notice Saxena has still not started on his soup.
The fundamentals, for example, include getting the sales and service network right so that the back-end systems are robust enough to service large volumes and the network becomes more customer-centric. "The focus is not on just the footfalls in our showrooms but on increasing that percentage of customers who buy our cars. My priority is to increase our ability to convert footfalls into sales and make customers happy about our brand and service," Saxena says. The rain lashing the window panes finally prompt him to focus his attention on the hot soup.
Since discounts have become highly commoditised, Saxena says the name of the game is to bring in "innovative" schemes. For example, only a few months back, buyers were asked to drive away the Vento at just Rs 1 in exchange for their old car, with the balance repayable after 11 months. What has helped is Volkswagen Finance, the finance arm of the German company, which draws up schemes that are difficult for the competition to replicate.
The used cars market is another focus area for Saxena. Late last year, the company brought Das WeltAuto, VW's branded used car dealership to India. Since the company has just 180,000 to 190,000 of its own models running on Indian roads, Das WeltAuto is looking at selling used cars of other companies as well.
The scope is huge, Saxena says. "Though unofficial estimates put the figure of the used car market in India equal to the new car one, our estimate is that it is 1.2 times larger," he adds. And with just 10 to 15 per cent of an estimated three million used-passenger vehicles (cars, utility vehicles and vans) market sold by the organised players, the scope for growth is huge. This is more so because the average replacement period for cars in India has shrunk to three to four years from five to six years about five years ago, he adds.
The rain has stopped, which cheers everyone up. Saxena orders Thai chicken green curry and rice before going back to his favourite topic. VW, he says, would like to go back to its 3 per cent market share in the immediate future (the target for 2018 is 7 per cent) on the back of new variants of existing models. For example, the Polo 1.2 (GT) TSI, a "line extender" of which he is immensely proud. No surprise, therefore, that the next five minutes are spent on the three pillars on which the product is marketed - "maximum power and minimum consumption", convenience and the best in segment fuel economy. More such special editions, car line extenders with more technology and features are in the offing. In any case, he says, new launches are not the only way to go. For example, VW hasn't launched any new model but it has seen a drop of just 3 per cent in sales in the first quarter of this year against the industry average of 10 per cent decline in the same period.
But to grab that share, VW, he says, will certainly not climb down from its premium tag it has so skilfully crafted in India. "We would like to maintain VW as a premium-mass brand, not a mass-mass brand," he adds. Does this mean the company will not launch its small car, Up!, as promised earlier? He ducks the question but says he would not like to compete purely in terms of price.
In any case, launching a new model is a time-consuming process. It takes three to four years to develop a model from scratch, he says. It's a different matter that the time-consuming process has not been a problem as far as VW's China journey is concerned. Of the 10 new plants VW is building around the world in the coming years, seven will be in China alone. This will raise production by 60 per cent by 2018 to four million units from 2.5 million currently. Saxena knows this but says the situation is vastly different in both the countries and he would only say that India remains a top-priority market for Europe's largest car maker.
The lunch is over but Saxena is in no hurry to leave. The engineer and MBA says he considers himself lucky to have worked in an Indian, Italian, Japanese, Korean and now a German company in his 30-year-long career. "Typically, I find the Japanese spending a long time in planning things before they roll out something, the Koreans are more risk-taking and they challenge things and the Germans put a lot of emphasis on rolling out things," he says.
As his black VW Phaeton rolls into the portico, Saxena says, though he loves to work for a high-aspiration company like VW, he is a stickler for a five-day week across the organisation because he thinks spending time with the family is the greatest stress-buster. There may be exceptions like a two-hour conference call on Saturdays among senior executives, but strictly from home. That surely is a small price to pay for VW's firefighters.