Struggling to gain a foothold in India with a meagre 2 percent market share, Volkswagen is far from its projected growth. As hard as it maybe, you cannot ignore one of the fastest growing auto markets in the world and the German car maker is eyeing the new volume segments to capture a strong market share. On the sidelines of the 2014 Polo launch, Volkswagen revealed its future plans for India which include a new range of products (Jetta facelift and next generation Passat coming in 2015), heavy localisation of components and an investment of Rs. 1500 crores that will be made in the next five years.
After bringing a range of international products, the company is now focusing on India-specific models to gain volumes. Volkswagen is looking forward to the new compact sedan and SUV segments. With both the segments gaining massive volumes, the European automaker too is working on its iteration of a sub 4-metre compact sedan and SUV that will be launched by 2016-2017. The new compact vehicles will be designed keeping in mind Indian interests and could be exported to other markets as well.
Volkswagen stated that the sub 4-metre space is a priority and the compact sedan will not be a sub 4-metre Vento, but rather a new vehicle that could probably come with the same underpinnings (PQ25 platform). The company’s second priority will be small cars in the entry-level range. Even though VW retails the Up! and Fox hatchbacks overseas, the company could not launch the models in India as they turned out to be expensive to produce in a price sensitive segment. VW has also been working to launch the Tiguan SUV in the country in the coming years.
Fuelling the growth, Volkswagen is also looking to increase its levels of localisation, which currently stands at 65-70 percent. The company fully imports its engines and transmissions in India, but will have to locally produce these parts in order to achieve at least 90 percent of localisation. The investment of Rs. 1500 crores in a phased manner will see the levels of localisation increase along with capacity expansion. The company has already invested Rs. 4400 crores in the country. Currently, Volkswagen’s Chakan facility has a capacity of 1.3 lakh units per annum and can be expanded to 2 lakh units as per demand.
After making its entry in the country in 2008, Volkswagen had originally anticipated a market share of 10 percent by 2014. However with no new products to offer and rivals getting better in the segment, it was certainly getting difficult for the automaker to maintain presence. With the new Polo though, Volkswagen is aiming to capture a significant share in the hatchback segment after pricing the vehicle more competitively at Rs. 4.99 lakhs (ex-showroom, Delhi).