Volkswagen has already declared openly that it will dominate the global car market by 2018, snatching the first position from Toyota. The company is betting big on China to reach the top of the sales charts. Volkswagen has been present in China since a long time now, entering the country in the 1980s. The German automaker has two joint ventures in China, one each with SAIC and FAW. Thus China alone accounts for 30 percent of Volkswagen’s global sales, which is quite a lot. In 2012, Volkswagen put 28 lakh vehicles on China roads. In contrast, the company’s Chakan plant in India has a capacity of around 1 lakh units and Volkswagen sold 66,860 units in India last year, while Skoda sold 34,678 units in the same period.
Thus India is not really a big market for the German automobile czar as the market is still quite small compared to other countries. VW’s entry in India has been late and they are not able to commit to further investments due to the doldrums thrown by the finance minister every now and then. Volkswagen recently had VAT return issues with the Maharsahtra government and all this hasn’t really increased their confidence in the country. Volkswagen has many reasons not to be pleased with its India innings. Not only have sales plummeted, the company has been involved in a legal row over distribution of Porsche cars in India with its former importer, Precision Motors.
It is natural for car companies to look at emerging markets for future survival. While car sales have dropped in Europe, the situation is grim in the United States as well. Thus India and China are the two countries which are showing lots of promise. But in terms of numbers, India is still far behind China. Factor in the inconsistency in policies and we know why car makers are running to China. India’s own Tata Motors which bagged Jaguar Land Rover a few years back from Ford, has turned to China to put the very first JLR plant outside of the UK. Even though heading to China means losing control over the company (no 100% FDI in automobile sector), car makers find it more profitable to manufacture and sell there.
Volkswagen is indeed trying its level best to boost its market share in the country. The company has come up with quite a few innovative marketing techniques but that hasn’t been enough to rock its boat. Volkswagen is some how forgetting that customer service is extremely important and they have failed to deliver a good after sales service experience to quite a few buyers in India. The company expects its MQB platform to be the highlight in its success in the near future.