Audi to invest Rs 192 cr in India

Q&A: Rupert Stadler

German luxury car maker Audi has grand plans in India and is going to invest ¤ 30 million (Rs 192 crore) by 2015 in production alone. Audi India, Audi's national sales office, was set up in Mumbai last year. Currently, Audi's India portfolio has a limited range on offer: TT, A8, A6, A4 and Q7. Local assembly of the A6 has started from the company's plant in Aurangabad and the same will begin for A4 by this year end. Rupert Stadler, Chairman, Board of Management, AUDI AG, spoke to Aminah Sheikh on the sidelines of the Germany car makers' annual press conference in Ingolstadt.

How important is the Indian market for Audi?

Currently, the premium car segment in India is very small. Things are changing with an increasing number of people travelling abroad and rising purchasing power. For instance, when NRIs return to India, they prefer using the brand they owned during they stay abroad.

The market for premium cars is gaining momentum and it makes sense for us to make our presence felt at the onset because it takes time for a brand to build. We decided on an exclusive Audi production line in the group factory in Aurangabad and set up a national sales office in Mumbai last year.

However, the challenge lies in developing infrastructure. Compared to other Asian markets, India still has a lot of work left on the infrastructural front. Once the infrastructure is better, the demand for premier cars will also rise from around 4,000 cars to 10,000-20,000 cars in the next 5-10 years.

What is Audi's plan for the Indian market?

The growth story in India will take time. We need to ramp up dealership networks. Until the end of 2007, we had three dealers in India "" Mumbai, Delhi and Bangalore.

In the first quarter of 2008, we inaugurated exclusive Audi showrooms in Gurgaon and Hyderabad; Pune and Chandigarh will follow in the next few weeks.

At the end of 2008, we will have 10 new Audi dealerships across India. Possible cities are Chennai, Ludhiana, Ahmedabad, Kolkata and Jaipur.

Will Audi consider another production plant in India?

We don't have any plans to open up a new plant at the moment. Our focus is on the Aurangabad plant where we plan to produce 6,000 units per year by 2015. In the starting phase in 2008, around 300 new Audi A6 will leave the production line there.

Another production plant does not make economic sense as of now. Of the ¤ 30 million (Rs 192 crore) to be invested by 2015, ¤ 10 million (Rs 64 crore) has already been invested in the company's first year in India.

What is the potential of outsourcing components from India? Will Audi use local components for manufacturing in India?

We constantly assess possible suppliers in India. At the moment, our production volume is too small to offer an attractive business case to the local industry. But I am confident that we can source parts from India in the long run.

How will Audi fight the TATA challenge in India? Will Audi get into the small car segment?

No, we do not plan to tap the small car segment. Audi will remain a premium brand. We will wait for TATA customers to graduate to premium cars.

What innovations is Audi working on?

Audi is pressing ahead with car-to-car communication and intelligent traffic guidance systems. This is another area in which we can achieve a great deal in terms of safety, traffic flow and climate protection.

We are also working on another innovation that will help us achieve our aim of enhancing vehicle safety. A system we call Driver Monitoring, that detects the driver's eyelids and provides a warning if the driver starts to suffer from fatigue or falls asleep momentarily.

What is Audi's plan for the global market?

We make sporty, high-quality, progressive cars that have enthusiastic followers throughout the world. Our portfolio of products is going to grow. We plan to expand our model range to 40 vehicles (nearly double the current figure) by 2015.

Each year we invest roughly ¤ 2 billion in our products, which I think will provide a number of interesting surprises. Our sales strategy will include setting up exclusive dealerships in large metropolitan areas around the globe. Our new Audi terminal concept is setting standards in architecture.

Given the current value of the dollar, we stand to benefit tremendously from having our own local production facilities.

Until now, the growth that we have seen throughout the world has not translated into growth we would like to see in the US market.

We remain committed to our intent of clearing the 1,00,000 mark this year in the US. By 2015 we hope to double our current sales figures.

(The author's trip to Germany was sponsored by Audi)