Volkswagen India: For the people

Strategies are realigned within the group as the VW brand enters India.

Surprisingly, within the Volkswagen group, the last brand to enter the country is the mother brand itself. When VW launched its debut model, the Passat early this month, it just unified the different VW brands' diverse focus in India.

It was Skoda Auto that first established the beach-head for the group in the country in 2001 with the Octavia. Today, the Laura, Superb and Octavia have made Skoda a leader in the D-segment. Now, the Czech manufacturer is planning to enter the volume-driven B-segment with the Fabia hatchback.

Ultra-luxury carmaker Bentley soon followed in 2003, with the Arnage, Continental GT and Flying Spur wearing stratospheric price tags. But the VW brand which would make as significant an impact as Skoda was Audi, which made a presence in the country with the A6, followed by the luxurious A8 saloon, the smaller A4 and the Q7 SUV. Audi is selling not more than 300 cars a year now. But the luxury brand from the VW portfolio expects their market in India to grow to 3,000 units by 2010. Like Bentley, Lamborghini too is the prerogative of the well-heeled. The legendary Italian sportscar maker, owned by Audi, has done well for itself. Though only a handful of homes in India have the hallowed sportscars parked in their garages, the numbers are better than what Lamborghini has achieved in China.

Because of their intense focus on China, Volkswagen ignored the Indian market so far. But now it's making amends. The Skoda plant at Aurangabad where Audi will soon start assembling A6s is also churning out the Passat. As Joerg Mueller, president, Volkswagen India, puts it, "Skoda's plant at Aurangabad is a Volkswagen group plant. The group can manufacture any car, given the group's local requirements, at any of its facilities worldwide." And VW and Audi can do that since the group utilises common platforms for the manufacture of cars. The Passat, for instance, is based on the same platform as the Superb and the A6.

Platform sharing is nothing new, but it's the Volkswagen group that has been the most successful in implementing the strategy profitably. While it does bring down development and ancillary acquisition costs, the group companies have been able to develop their own unique cars on the same platforms and work as watertight companies with their own business models. So while Skoda has a reputation of making luxury cars in India, it is better known for its value-for-money quality cars worldwide. Audi too is considered as a serious player in the luxury car segment competing with Mercedes-Benz and BMW. "We don't dictate Skoda's model plans for India or any market as such," says Mueller.

This strategy has helped Skoda and Audi become Volkswagen's most profitable concerns while the mother brand itself tries to reinvent itself. Volkswagen tried to get into the luxury car segment with the Phaeton and the Touareg internationally, but not with much success. And it is not until Martin Winterkorn was called in from his successful run at Audi to run Volkswagen as its chairman, that the company has regained its focus. The Up! small car concept shown at the Frankfurt Motor Show was the first step in that direction, to put Volkswagen back in the 'people's car' seat. Even in India, while it begins its conquest with the Passat, it will launch a host of small cars and mid-size sedans such as the Jetta. "We will launch the new Polo in 2009 and are poised to launch another small car post-2010," says Mueller. All these cars will roll out of a 110,000 capacity plant, coming up on the outskirts of Pune. This too will be a Volkswagen group plant, and as Detlef Wittig, chairman, Skoda Auto says, "We can assemble cars at VW's plant in Pune if we run through capacity constraints." It seems like life comes a full circle in the Volkswagen group.